The EU ‘Reichstaat’ in Systemic Disarray: A ‘Long War’ Portends

The deep sense of growing inequalities is matched only by popular fears of community ‘safety-nets’ that have been dismantled, and of the insecurity of living perpetually at the cusp of economic extinction.

“If the euro fails – Europe fails,” Angela Merkel has said. “And indeed, the failure of the European project is now a genuine possibility: Monetary Union is no longer seen as irreversible, and neither is the EU”, writes Professor Guido Montani of Padua University.

Yes – but the profound structural nature to the crisis, and the concomitant perceived threat to German and to ruling euro-élite interests suggests that any solution will be as bitterly fought-over, as has been Brexit in the UK. It is a foretaste – and warning of the breakdown of national cohesion that is to come.

After years of austerity and stagnation amongst some EU states, it is clear that both the structure – and the culture of the Union – insisted on by a post-war Germany, is facing a growing insurrection, a demand for change – both from member-states, and now, significantly, even from within Germany itself.

It would be entirely to miss the point however, to reduce what is occurring to an argument over monetary and fiscal ‘austerity’. The ‘demand for change’ reflects also, another divide — a cultural divide. It is a ‘divide’ that lies at the heart of Germany itself, as well as within other EU states.

The German demandeurs challenge – from a strictly German perspective – the very Reichstaat mentality that has framed EU monetary union, and its notion of an ‘empire’ of diverse peoples converging on transnational EU ‘values’, under the austere discipline of central government regulation, law and fiscal control.

Physically, the German ‘divide’ is symbolised by the River Elbe which cuts a roughly diagonal line from the North Sea to the Polish-Czech border, and which has been more than just a waterway, for at least 21 centuries. Roman emperors dared not venture beyond the Elbe: It was the eastern border to Charlemagne’s empire, too. And it somehow signifies a cultural barrier which has persisted down into modern times – with drastic effect. Three decades after the fall of the Berlin Wall, the rift between East and West Germany is still palpable.

An AfD leader in Saxony-Anhalt puts it this way: “Let me make this clear: the AfD doesn’t want a revolution, but we want a thorough reform to make Germany more suitable to the mentality of the East and the impulses that are set here”. He calls for a revival of “classic Prussian virtues such as straightforwardness, a sense for justice, honesty, discipline, punctuality, orderliness, hard work and dutifulness” — in juxtaposition to contemporary ‘guilt-ridden’, liberalism.

The emergence of a viable alternative to the ‘establishment’ politics of the CDU is so important, precisely because of the role that that party played historically, in the setting of the structure of the EU, and in imposing its ethos.

Noah Strote, writing in Foreign policy, observes:

“The CDU’s founders, most of whom hailed from the western regions of Germany where [Roman Catholic] Christianity is most historically rooted, originally voted to support Nazism. Far from being a fluke, their alliance was a logical consequence of demographic fears: The man who would go on to become the party’s leader and first chancellor, Konrad Adenauer, was not alone in his belief that the northeastern part of his country — the heart of Prussia, with its capital in Berlin — was populated by a mongrelized, Asiatic, not-entirely-white race, whose non-Christian culture threatened to spread. While Adolf Hitler, prior to coming to power was suspect, for many reasons; at least he vowed to protect the nation’s Christian identity from such pernicious elements …

After World War II … those same politicians emerged to offer a new vision for German, European, and world politics — this time with a more dependable and powerful partner, the United States of America. Distancing themselves from Nazism, they advocated a “Christian image” of politics based in the values of individual freedom, economic liberty, and cultural openness. The vision appealed to the U.S. occupiers, which ended up tipping the scales in the CDU’s favor … [It appealed also to] CDU leaders such as Adenauer, who were secretly pleased that their Christian heartland was now demographically sealed off from the Asiatics …

[What] the AfD [now] is eager to show is that Merkel and the CDU will not dare to fight for what it has always claimed to value: the conservation of a Christian Germany and Europe [i.e. by stopping immigration]. And in doing so, they are exposing the tension [hypocrisy?] inherent in the CDU’s program: the repressed assumption that the maintenance of a certain type of ethnic majority is necessary for that project.

The AfD claims it is no more deserving of the “white nationalist” label than the historic CDU, upon which it is modeled … [and] the word “alternative” pulls double duty as a description of the party’s goal to become the true guardian of Germany’s — and Europe’s — Christian identity”.

What the AfD is saying is that Merkel’s – and the CDU’s liberal vision of a European Reichstaat – is not only failing as an economic vehicle (notably through having concentrated wealth in the west German ‘centre’), but it is also failing secondly, in preserving Europe’s inner coherence. And that a halt to recent Muslim immigration is essential to guarantee a certain cultural homogeneity that does not overstrain the native population (i.e. preserving national homogeneity, must trump EU globalism).

We are speaking here of old divides: The whole of eastern Germany (which was much larger than now, before 1945) was, for 800 years, contested land between Germans and Slavs, until Prussia managed to defeat and annex the whole of Germany between 1866 and 1871. The legacy of this unification has been this lurking sense of an ever-present and potentially hostile not-entirely-‘white’ Other, to which Adenauer was so acutely sensitive.

Or, in other words, the rift remains between, on the one hand, the CDU Germany of the ‘Good German’ (liberal, democratic, crisis-proof and stable), and on the other, the eastern‘Bad Germans’, whose experience has been so very different, according to Konstantin Richter: “[For] those who were schooled in the GDR … there was no acknowledgment of guilt, and no sense of atonement. (The socialists in the East considered [rather] the West [to be] the sole successor to Nazi Germany). As a result, many East Germans feel that the identity of the ‘Good German’ isn’t theirs, and they resent the fact that it is being imposed on them… Schuldkult, they call it, “the cult of guilt.”

If the reader detects many resonances with the US today (the ‘deplorables’ who reject the ‘guilt’ of being white), and with the Italian experience of the ‘Mezzogiorno’ (who reject the slight of being the ‘backward south’), he or she would be almost certainly right.

Yet marking the second prong to this demand for change is a serious revolt against Germany’s Reichstaat economic vision of what is required for itself (and Europe) to become an economic European ‘empire’.

The economic aspect to today’s pan-Europe economic discontents however, reaches back to Germany’s traumatic experience of the inter-war hyper-inflation, to the Great Depression of the 1930s, and to the social erosion to which it led. To exorcise these ghosts, Germany deliberately painted the EU into an automatic system of austerity ‘discipline, enforced through a German-surveilled, Central Bank (the ECB).

The whole was ‘locked-fast’ in automaticity (i.e. in Europe’s ‘automatic stabilising mechanisms’). This was allowed by other European states, since it seemed the only way (it was said), that Germany would agree to put its revered ‘Ark’ of the now stable Deutsche Mark into the common ‘pot’ of the ECM.

Professor Paul Krugman explains:

How [then] did Europe manage to follow a common monetary policy? This was a bit of neatly calculated hypocrisy. Although the EMS was in principle a symmetric system, with all countries treated equally, in practice it was tacitly run as a German hegemony: the Bundesbank set interest rates as it pleased, and other central banks then did whatever was necessary to keep their currencies pegged to the Deutsche mark. This arrangement allowed the system to meet two seemingly irreconcilable demands: the insistence of Germans, who still remember both the hyperinflation of 1923 and the economic miracle that followed the introduction of a new, stable currency in 1948, that their beloved Bundesbank keep its hand firmly on the monetary tiller; and the political imperative that any European institution must look like an association of equals, not a new, um, Reich. The Europeans, they are a subtle race.

But come actual monetary union, this subtlety will no longer work, because a truly unified currency must have someone – a European Central Bank – explicitly in charge. How could this institution be set up to give each country an equal voice, yet satisfy the German demand for assured monetary rectitude?
The answer was to put the new system on autopilot, pre-programming it to do what the Germans would have done if they were still in charge. First, the new central bank – the ECB – would be made an autonomous institution, as free as possible from political influence. Second, it would be given a clear, very narrow mandate: price stability, period – no responsibility at all for squishy things like employment or growth. Third, the first head of the ECB, appointed for an eight-year term, would be someone guaranteed to be more German than the Germans: W. Duisenberg, who headed the Dutch central bank during a period when his job consisted almost entirely of shadowing whatever the Bundesbank did.

Finally, just in case governments should be tempted to use their control over taxing and spending to challenge the ECB’s grip over monetary policy, Germany insisted on a “stability pact” that limited the ability of euroland governments to run budget deficits”. 

Der Spiegel would editorialise in March 2015, that it is not wrong to talk of the rise of a ‘Fourth Reich’: “That may sound absurd given that today’s Germany is a successful democracy without a trace of national-socialism – and that no one would actually associate Merkel with Nazism. But further reflection on the word ‘Reich’, or empire, may not be entirely out of place. The term refers to a dominion, with a central power exerting control over many different peoples. According to this definition, would it be wrong to speak of a German Reich in the economic realm?”

An ambitious ‘Empire project’, but the experience increasingly is being questioned: “Germany has not created stability… but instability in Europe. Germany’s rhetoric focuses on stability: it talks about a ‘stability union’ and is proud of its Stabilitätskultur, or ‘stability culture’. But its definition of the concept is extremely narrow: when Germany talks about stability, it means price stability, and nothing else. In fact, in attempting to export its ‘stability culture’, Germany has in a broader sense created instability … Many other eurozone countries see the rules as serving Germany’s national interests, rather than their own, explains Hans Kundnani in The Paradox of German Power.

Just as the Bundesbank set the rate of exchange at 1:1 on the unification of the two Germanies into the Eurozone which precluded any prospect that the East could compete against the West, so too Italy (and other non-export surplus states) – their currencies overvalued, when merging into the new Euro – have experienced something akin to the East German disappearance of its manufacturing base.

For many in the East, German unification in 1990 was not a merger of equals, but instead an “Anschluss” (annexation), with West Germany taking over East Germany. Reasons for East German disenchantment can be seen everywhere: The eastern population has shrunk by about 2 million, unemployment soared, young people are moving away in droves, and what was one of the Eastern Bloc’s leading industrial nations is now largely devoid of industry.

And here lies the kernel of the crisis. There has been a call from all sides to try something different: such as relaxing the fiscal rules that are destroying public services, or simply to touch the ‘live wire’ of reform of the financial and banking system.

And here is the rub: All such initiatives are prohibited in this locked-down treaty system. Everyone might think to revise those treaties, but that is not going to happen. The treaties are untouchable, precisely because Germany believes (or, says it believes) that to loosen its disciplined hold over the monetary system, will be to open Pandora’s Box to the ghosts of inflation and social instability arising, to haunt us anew.

The reality is that the European ‘lock-down’ derives from a system that has wilfully removed power from parliaments and governments, and enshrined the automaticity of that system into treaties that can only be revised by extraordinary procedures. No one in Brussels sees any prospect of ‘that’ happening – hence the Brussels ‘record’ is stuck: repeating the mantra of ‘There Is No Alternative (TINA) to more, and closer, Euro-integration.

So, a deadlocked system stands in direct collision with a widening insurrection against a Euro-Reichstaat, and against the inequalities and social fragmentation inherent in a hyper-financialised world.

Can the EU reform? Can it survive? The options are difficult: If the rest of Europe cannot survive the Bundesbank ‘lock’ on the Euro, then the obvious solution would be for Germany, and its export-surplus allies, to leave. But who can force the German Establishment to yield up such a clear and present benefit? Draghi’s replacement as head of the ECB is likely to be another Bundesbank nominee. And the paradigm of a hyper-financialised, fiat credit-led, world is not just the creation of Europe. It is embedded in the US too. The EU marches in step with it, and its beneficiaries intend to claw-down all who threaten it.

Yet the ‘insurrection’ will not simply fade away. The deep sense of growing inequalities is matched only by popular fears of community ‘safety-nets’ that have been dismantled, and of the insecurity of living perpetually at the cusp of economic extinction. The EU official intolerance merely exacerbates the polarisation and increases the anger.

Brexit is viewed by some as an ‘outlier’ to EU disorders — that it simply reflects British insularity, and may be disregarded. But they would be wrong. It is one fraught episode to what is set to be a ‘long war’. The next chapters are already clear: Les Gillets Jaunes in France, La Lega in Italy, the AfD in Germany, the May MEP elections, the Visegrad group, Vox in Spain, etc. etc. Brexit merely is the canary in the mine shaft, warning of coming danger. The counter-revolutionaries (as in Britain) are determined to crush all insurrection: It will be highly fraught.

The EU ‘Reichstaat’ in Systemic Disarray: A ‘Long War’ Portends