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Analysis
Former Chancellor confirms Germany’s dominance

Former Chancellor confirms Germany’s dominance

Schröder’s wolfish charm on the euro 

by David Marsh

Tue 18 Feb 2014

Former German chancellor Gerhard Schröder has broken with six decades of political correctness by declaring that Germany’s ‘dominance’ in the European Union is exactly the opposite of what was planned 15 years ago by the architects of the economic and monetary union (EMU) – especially the French government.

In a new book Klare Worte (Plain Speaking) – bristling with swashbuckling self-confidence – Schröder, who celebrates his 70th birthday in April, explains how he has revised his formerly sceptical attitude on the European single currency on the grounds that Europe has moved towards better-coordinated financial and economic policy.

In fact, his much-proclaimed (and, in the light of subsequent events, completely correct) caution over the single currency during his Opposition years before the end of 1998 was always tactical rather than strategic. Schröder was habitually cynical about unduly-engineered economic planning. Still more importantly, Schröder believed that he had automatically to contradict anything the then Chancellor Helmut Kohl backed.

Beyond his undoubted entertainment value, Schröder possesses a cold, hard, relentless logic; an ability intelligently to change his mind (and to explain beguilingly why he does so); and a technique of delivering penetrating one-liners on other statesmen’s qualities.

Tony Blair, the former British prime minister, irritated him because of his ‘priestly’ demeanour – and because of his insistence on bringing his personal coach with him when they played tennis. (Schröder still won). He had a soft spot for George W. Bush in spite of their disagreement over the Iraq war. And Bill Clinton, otherwise a cult figure for the European Left, did not endear himself to Schröder because he habitually turned up to meetings one hour late.

Schröder holds the supreme accolade for prescience. He predicted in early 1998 – a year before the euro was born – that Germany’s industrial and economic dominance in Europe would increase because Germany’s inflation rate would be lower than other European countries which would no longer be able to devalue because of their adherence to EMU, leading to a big improvement in German competiveness and industrial strength. That is exactly what has happened.

Schröder, who termed the euro ‘a premature sickly child’ before he became chancellor at the end of 1998, presided over the introduction of the single currency in 1999 as the successor of Helmut Kohl. Eight years after he left office in 2005, Schröder writes in his book that Germany has a special obligation to strengthen the single currency because it has ‘reinforced Germany’s dominance – contrary to the intentions of [former French President François] Mitterrand.’

In his book, launched in a blaze of publicity last week in Berlin in front of a 500-strong audience, Schröder puts paid to habitual German self-deprecation by emphasising Germany’s European strength. There is vulnerability, too. He admits that the collapse of the single currency would be a ‘disaster’ for the Germans by exposing a new German currency to a ‘massive’ revaluation. He thereby puts his finger on the essential reason why the Germans are willing to expend great quantities of financial and political capital to maintain the project’s survival.

His appearance at the Alfred Herrhausen Foundation of the Deutsche Bank, where he was introduced by the bank’s joint chief executive Anshu Jain, gave Schröder ample opportunity to show off his particular brand of wolfish charm. Rather like Germany’s senior Social Democrat elder statesman, Helmut Schmidt, who has just turned 95, Schröder has seen his popularity rise in direct proportion to the number of years elapsing since he held office.

He publishes his book at an intriguing time. Chancellor Angela Merkel (whom he barely mentions) is on the ropes, rocked by nascent instability in the Grand Coalition in which she was forced to govern after the inconclusive German elections in September. The Social Democrats – having finished well-beaten in September – have manifestly risen in power and stature in recent weeks of coalition infighting.

Deutsche Bank has faced some criticism in Germany over having given Schröder and the Social Democrats a well-publicised platform ahead of the May European elections that are widely expected to bring a backlash against established European parties.

Schröder was heavily criticised in his own party for introducing in 2003 to 2004 the Agenda 2010 package of reforms – supply-side and labour market measures now recognised worldwide as spurring Germany’s better economic performance during the past few troubled years.

In his book he crosses another Rubicon by stating firmly that, because of political factors, the much-hyped independence of the European Central Bank (and of the Bundesbank) is in fact extremely constrained. ‘The sovereignty of the European Central Bank has existed no more than that of the Bundesbank,’ he writes. Asked at the book launch about the reasons for his authorship, Schröder gave as his answer the same mixture of chutzpah and cheerful and political incorrectness. Whereas higher-minded German politicians would have said that they write books to improve the world, Schröder gave a typical snappy replique: ‘It’s my birthday present to myself.’

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