Germany: time for a big shift

(Source: Entreprendre.fr)

          The abandonment of the Nord Stream 2 pipeline, the move towards a reduction in energy dependence on Russia and even more the supply of weapons – for the first time since the second world war – to a country at war as well as the announcement of the creation of a Fund of 100 billion euros to finance the rearmament, have appeared , in recent weeks, as profound changes of the German policy. These major decisions were obviously largely determined by the war in Ukraine but they are not only its consequence. The creation of a new coalition in Germany bringing together Social Democrats, Liberals and the Greens, after the last general elections in the Bundestag, is also at the origin of such developments. In this context, is it not premature to talk about a major shift in Germany in relation to the policies pursued for decades? 

The Merkel method in question

It is clear that what has been known for a long time as “Merkelism” seems to have gone a long way or is at least widely questioned. For her part, the former Chancellor remained almost silent, with the exception of a statement justifying her decision in 2008 to refuse acceptance of Ukraine and Georgia into NATO. 

Merkelism was initially viewed positively as a method made of discretion and efficiency, and above all as one of great ability to avoid the pitfalls of politics and to stay in power. The Chancellor has served four terms, that is to say sixteen years at the head of government, even though twelve years were accomplished in the framework of a grand coalition of the CDU with the SPD. Today, however, the Merkel method is perceived as suffering a fundamental weakness, an inability to adopt clear orientations and a lack of both geostrategic and ultimately economic vision. 

By relying on energy imports considered advantageous in terms of prices and on exports particularly to China, Ms Merkel has certainly served well German industry in Europe and beyond. Her successes in terms of growth and the fight against unemployment are indisputable and impressive. But the struggle against demographic ageing, a major challenge identified for many years, has been more chaotic if we refer for example to the reception of a million people in 2015. Public investment appears to be affected by OECD standards, the digital lag is considerable and the energy transition is set aside. On this last point, the former Chancellor cannot be considered responsible for the decision to close nuclear power plants taken before it and for the conservation of coal mining. But short-sighted management, another synonym of the “Merkel method” with a non-confrontational approach to problems and their supposed balanced resolution, has clearly made Germany the biggest polluter in Europe.

If an ambiguous position between East and West, in the tradition ultimately of German politics, had some advantages, if it was consistent with a certain energy policy to try to save Nord Stream, if it was not unfounded to spare China – for the greater benefit especially of the German automobile industry -, if the security dependence on the United States from Konrad Adenauer who was qualified as « Chancellor of the Allies » (der Kanzler der Alliierten) never changed, the war in Ukraine shattered much of this certainty. Two priority themes appear today: energy and defence.

Continuity or rupture?

The statue of Angela Merkel was not unbolted and overturned, not only because we are here in a great democracy but mainly because the Merkel method was consensual. Olaf Scholz, the social democratic partner of the previous coalition as Finance Minister, also became Chancellor himself after the 26 September election. 

The new head of government, whose prudence has nothing to envy to that of Mutti and is even a caricatural expression in the eyes of part of the opinion, has the misfortune to sail in strong and contrary winds (headwinds or Gegenwinde). The SPD has just suffered a severe defeat in the regional elections in North Rhine-Westphalia which should henceforth lead to govern together Greens and «Blacks» (CDU) with the ambition of making Nordrhein-Westfalen the first energy neutral region of Europe.

Annalena Baerbock is increasingly seen as the “strong man” of the government. The minister of the Auswärtiges Amt did not wait for the war in Ukraine to make a different voice heard. It has so far succeeded in maintaining a coherence between a realistic approach to ecology, the promotion of a diplomacy giving a greater share to «values», especially towards China and Russia, while confirming the anchorage of the Federal Republic to the West. At the end of the past year, it had the merit of having the government adopt a humanitarian assistance plan for Afghanistan – the first in the world – which honours Germany and should be a model for Europe. It stood up to its Russian counterpart Sergei Lavrov in Moscow even before the war in Ukraine; his relationship with Antony Blinken seems to be excellent, as should be his partnership with Catherine Colonna, who also hastened to visit her.

A German rearmament process

The announcement by Chancellor Scholz, just three days after the beginning of the war in Ukraine, of the creation of a 100 billion euros Fund for the financing of military equipment stroke the minds not only because of the large sums at stake (NB: about twice the annual French defence budget) but because it is Germany. This effort would bring the German defence budget to around 2%, which is the NATO target that France is already abiding.

The decision was also preceded by another “revolution” which was Germany’s decision to provide Ukraine with arms, the first time to a country at war since the end of the second world war. Criticism from beneficiaries in particular has since been voiced, particularly about the slow pace of deliveries. But this should not necessarily be seen as a contradiction between announcements and reality, since Germany does not necessarily have considerable available capacity and increasing production in this area requires time.

German-made Guepard tanks are not expected in Kiev but Christine Lambrecht, minister of Defence, has now set the deadline in mid-July, arguing for limited capacities (NB: it would be 15 units out of the 50 available in Germany) to which must naturally be added ammunition. As for the large-calibre Leopard tanks, which have been tested in Bosnia, Berlin is running out of stock due to deliveries mainly to Poland (NB: 250 out of a stock of 266) and to a lesser extent to the Czech Republic (NB: some 20 units).

The trial in Germany in this matter seems unfair in view of these clarifications and especially in view of the “great leap forward” that the country is currently making in terms of defence. Germany still remains the « economic giant » but is less and less the « political dwarf » whose the Bundesrepublik has been labelled for a long time. The modification of the latter status has been achieved in particular through a greater commitment to peacekeeping operations, including in Afghanistan, and a move towards a wider sharing of the burden, Apart from financing, European security can only contribute to this.

It should never be forgotten that the Federal Republic of Germany, from Rhineland to Berlin, rose from the ashes (Deutschland aus der Asche). An orphan nation of its past, divided and amputated by almost a third of its territory because of the demands of Stalin and also the understanding sometimes of the Western victors, developed in a demanding democracy while being deprived of certain attributes of sovereignty. This was the case for the defence, which was subsequently subject to restrictions and inherited taboos. 

Under occupation, Germany was first disarmed and demilitarized. Then the question of German rearmament arose at the initiative of the Allies. The Pleven Plan of October 1950 provided that Germany would have no national army but that limited German units would be integrated into a « European army ». The 1949 Atlantic Pact was not initially opened to Germany. The restoration of Germany’s rights was conditional on an agreement on a “European Defence Community” (EDC). This gave rise in France to what was called a « quarrel », in reality to a profound political and moral crisis. Opponents of a treaty supposed to “denationalize” the French army would eventually prevail. It was ultimately the refusal of the French Parliament to ratify the Treaty that accelerated Germany’s accession to the Atlantic Pact in October 1954. But Germany agreed not to manufacture ABC weapons, that is to say atomic, biological and chemical ones and other restrictions on military equipment.

Emblematic dossiers: EADS-BAE Systems and FCAS

If the genesis of the German rearmament allows us to better assess the importance of the changes that are taking place, we can also wonder about the European or Atlantic character of Germany’s defence. Two issues, which are little known to the public, or even totally ignored by it, deserve to be mentioned in this regard.

In 2012, at the request of industrialists, a merger project was developed between EADS and BAE Systems, a British company in the defence and aerospace sector, the leading supplier to the UK Department of Defense. It was the Bloomberg Agency that revealed in September 2012 discussions already underway for several months between the companies. It should be noted that BAE Systems was once a shareholder of Airbus before ending its activities in the civil aviation industry. EADS, BAE and Finmeccanica own Eurofighter.

What were the objectives and challenges of the project? EADS and BAE were respectively the leading manufacturers of civil aircraft and armaments in Europe and their merger aimed to cope with the cyclical vagaries of the market and to compete with Boeing. The joint capitalization would have put EADS and BAE almost on par with the American company (NB: around €40 billion). EADS would have had 60% control of the new company.

In this complex matter, the German government was particularly attentive to the question of shareholding. The French State had 15% of the shares of EADS while the British Government had a golden share, a kind of veto right in certain circumstances, in BAE. The influence of the German government within EADS was through state participation in Daimler. The French State share would have been 9% at the end of the merger. As a result of the sale of Daimler’s shares in EADS at the time, Germany would have had to intervene in a substantial and costly way to guarantee the “Franco-German balance” to which it was attached within EADS. On the British side, the golden share option was favoured for the three governments. Berlin, for its part, was particularly concerned about the question of employment, which could be affected by the merger, whereas 49,000 people were shareholders of EADS in Germany.

The government of David Cameron was convinced that the defence industry and the British economy as a whole would benefit from the deal. He saw no insurmountable barrier in the rapprochement with a European aerospace giant but on the contrary a commercial logic. He was keen to reassure the United States about BAE’s close relations with the Pentagon and to convince President Obama. Finally, the deadline set by the London financial market authorities was not met and the merger project was not completed.

Whatever the respective motivations of the parties, the EADS-BAE Systems merger was de facto a major European project. An iconoclastic question can even be asked: without failure, would Brexit have taken place? The failure was clearly attributed to Germany by Chancellor of the Exchequer George Osborne (“we have been a bit disappointed, primarily by Germany’s attitude, which in effect vetoed the deal”).

Many lessons can be drawn from this experience, but the main one is undeniably – whatever the real responsibilities – that the Europe of the nations that count and of major industrial projects has been undermined. When we criticize the United Kingdom, and sometimes rightly so, for its failure to show European solidarity, it is important to remember that.

The FCAS file (NB: future air combat system) remains open. This considerable project for 2040 aims to bring together national capabilities (cf. Dassault, Airbus Defence and Space, Eurofighter, Safran, MBDA, Thales, etc.) which are not limited to designing a new generation aircraft but bring together different equipment and disciplines (cf. drones, satellites, aerial surveillance and refuelling aircraft, command systems, etc.). The Franco-German discussions on the issue seem to have been difficult, whether they concern issues of sovereignty or the preservation of industrial interests. In June 2021, the Bundestag approved the continuation of the project, subject to conditions as regard assembly and flight test phase. The cost of the project is estimated at €8 billion up to 2030 and in total at a range of €50-80 billion.

As with the EADS-BAE Systems merger, the FCAS project is underpinned by a major question about the strength of true European ambitions. Shortly after the Scholz government announced the creation of a €100 billion Defence Fund, Germany revealed its choice for the F-35s in order to modernise its air capacity…

The energy nightmare

At the Davos Forum, Chancellor Scholz confirmed his country’s determination to put an end to Russian oil imports by the end of this year and to intensify its efforts to find alternative sources of energy to gas. Nord Stream 2 had been stopped at the beginning of the invasion of Ukraine.

The facts of the problem for Germany and for Europe as a whole are sufficiently well known that they are not discussed in detail. Germany, which has abandoned the civilian nuclear industry and has always planned – despite the Ukrainian crisis – to close its last power plants, is currently dependent on more than 50% of Russian gas imports and even coal imports from Russia. Moreover, it has not given up the exploitation of its coal mines, so it is clearly the first polluting country in Europe.

To put it in a nutshell, Germany has built its economy on the principle of “buy from Russia, sell to China”. It was a question of obtaining relatively cheap energy based on fossil materials, while developing considerable trade surpluses (cf. €172 billion in 2021, while the balance of goods and services of France was in deficit in the same year for an amount of €53.2 billion, or 2.3% of GDP). The current situation on the European continent requires painful adjustments in this context.

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After years of “Merkelism”, whose anaesthetic character, if not erroneous choices, are now being measured, Germany is not just wondering and continuing to “oscillate” between its strong anchorage in the West and its interests in the East. It also makes fundamental decisions. We must respect the pace of its evolution if not of the great shift taking place before our eyes. 

 

 

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