All Eyes Turn to Germany

Last week's votes in France and the Netherlands planted the draft EU Constitution six feet under the Arc de (non-) Triomphe. France's non reflected, according to Claire Berlinski in Sunday's WaPo, "a frustration with unemployment, a rejection of market reforms and a widespread loathing of the government of President Jacques Chirac." Mixing animal metaphors, Chirac's become both a lame duck and a sun-lit groundhog, sentencing France to two more years of winter (i.e., a standstill until the 2007 Presidential election).¹ The French and Dutch votes are a plus for British PM Tony Blair who, says the Economist, suddenly is "saved from the consequences of his rashest decision" to schedule a Constitutional referendum:

Britain is still in the European club, but political union is dead. Better still, French fingerprints are all over the murder weapon. Having spent years being reviled as “bad Europeans”, the British are taking quiet satisfaction in all the odium now being heaped on France.

Euro-crats claim to "remain convinced that the Constitution makes the European Union more democratic, more effective and stronger." No one believes them; even bloggers are bored.

Germans are anything but bored. Though it avoided a referendum (its Bundestag overwhelmingly OKed the Constitution), Germany's unable to duck debating its direction, economic and political. Indeed, Germans are facing the perfect storm: a worsening economy; disquiet about the Euro; and widespread worry "about global competition and immigration."

It wasn't supposed to be this way. When first elected Chancellor in 1998, Gerhard Schröder pledged to streamline red tape and reform an overly-rigid, high-cost labor market. Distracted by foreign policy (Kosovo, EU integration), Schröder stalled early, but had some success loosening labor markets in 2003-04 (the so-called Hartz IV reform).

However, the new laws proved both too significant and too slight. Lacking a majority in the upper house, the government "regularly had to rely on negotiations with the [opposition, meaning] that deals were long in coming and legislation has frequently been watered down." And Schröder's changes never delivered growth, undermining the Chancellor's popularity in his own left-wing party. According to their Embassy in Washington:

Germany's jobless rate stood at 12% in April, and the country's six leading economic institutes have forecast anemic growth of just 0.7% for 2005. This week, the closely-watched Ifo index of German business confidence tumbled to a near two-year low on concerns about the future outlook.

Going Down (source: The Economist)

In May, when his center-left party was clobbered in an important regional election, Schröder rolled the dice and called a snap election, scheduled in September. Pollsters predict an easy victory for the center right opposition led by Angela Merkel.

Will changing parties change Germany? Writing in the Weekly Standard, Victorino Matus thinks not:

Aware of Germans' sometimes violent reaction against reform, Merkel will most likely not announce any radical measures between now and Election Day. In fact, her Christian Democrats have already backpedaled on tax cuts and the liberalization of stringent German laws protecting labor. As Josef Joffe noted in the Financial Times, "Although they are basking in the warm glow of the polls, the besiegers are trapped. If Angela Merkel's Christian Democrats move to the right--say, towards labor market liberalization--they will face even more of the same anger that has savaged the SPD. . . "They will probably go along the lines of the social economic reforms that the Social Democratic/Green government tried to start but couldn't finish," says [German Marshall Fund Transatlantic fellow] Michael Werz.

DL from Heidelberg also is pessimistic, albeit for other reasons. Guest posting on Ulrich Speck's English language Kosmoblog, DL spots a deeper concern:

For the first time in the post-war period there is not enough to go around. On the streets there is a sense of injustice as entitlements are eliminated. Germany’s political elite continues to believe elections can be won by finding the right balance between free market growth and the welfare state. This effort is doomed because it strives to reconcile opposing forces. It is impossible to return to the protections of the medieval guild in a global economy. . .

Germany’s leaders have been the primary advocate of a United States of Europe and a European identity in place of German identity. . . This is precisely the source of voter discontent. While the government has devoted itself to establishing a European identity at the national level it has failed to broaden the definition of Germany at the personnel level. It has made the mistake of telling its electorate it can have all the advantages of a global economy in the form of exports and access to products while maintaining the illusion it can sustain the cultural identity of its grandparents.

Because Mr Schröder and Mr. Chirac agreed on most everything, The Economist says the election will further undermine the EU:

[T]he more the two leaders got along, the weaker the Franco-German engine of the EU became. Such joint initiatives as weakening the stability and growth pact are seen by smaller member states as self-interested, not as a search for compromises acceptable to all. In Berlin, there is a growing feeling that the two countries have become too close for comfort. It is also becoming understood that, in a club of 25, Franco-German agreement is no longer sufficient for the EU to move ahead.

Europe faces its greatest challenge since the downfall of the Soviet Union. Western Europe's been led by elites for 60 straight years. Eastern Europe's been on hold almost as long. But globalization and decreased trade barriers link the world as never before. And the French and Dutch elections show nation-states aren't at the "end of history."

Europe's had it all: global power and an enviable lifestyle. Suddenly, Europeans must choose. DL and many others understand Europe can't go back. Less acknowledged, but equally accurate, Europe can't go forward as is. And aside from enshrining Federalism -- permitting each nation to plot its own path -- there's no right answer. No wonder DL, and many others, are worried. I don't blame 'um.

(via MaxedOutMama)

More:

MaxedOutMama digs deeper, including the rumor Schröder might resign before September's election.

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¹ The Economist called for Chirac's resignation; don't hold your breath.