Judy Asks: Is German Strength an Illusion?

The short answer is no—not if you define strength in terms of economic weight and diplomatic influence. On both measures, Germany has become the unrivaled leader in Europe. And its importance is likely to grow following Britain’s decision to leave the European Union.

But German strength is more precarious than is commonly assumed, and it has been flattered by the comparative weakness of Germany’s European partners, notably France. Scratch the surface and the German economy does not look as formidable as its reputation. Politicians in Berlin over the past decade have failed to build on the economic reforms of former chancellor Gerhard Schröder. With interest rates at record lows, Chancellor Angela Merkel’s government may be missing a historic opportunity to invest more in the country’s future. The German banking system looks fragmented and weak, coddled for too long by politicians and hands-off regulators. And Merkel herself has noted that the car industry, the jewel in Germany’s economic crown, could soon be overtaken by nimbler foreign rivals because it has been slow to embrace new technologies.

Germany has begun shedding its postwar aversion to all things military. After decades of neglect, politicians are promising to invest more in defense and increase the size of the Bundeswehr. But here too, Germany may need to act faster and bolder if its capabilities are to match its more ambitious aspirations.

Germany’s strength rests on its large economy, its relative political stability and consensus on key national interests, and the skills and experience of its chancellor. German strength also rests on the relative weakness of the country’s European neighbors. But strength means little if it cannot be translated into leadership, and in Europe’s current identity crisis, leadership by default will not suffice. Germany will have to consolidate its complicated self-image with a powerful vision for Europe. Two challenges emerge.

First, because of the extent to which German strength is a function of Chancellor Angela Merkel’s strength, the 2017 national election might weaken Germany’s resolve. The migration crisis has strengthened right-wing voices. And while Germany’s center-left Social Democrats have over recent years found themselves pressured to follow Merkel’s course of no alternatives, lately they have started to reclaim an independent profile. By questioning sanctions on Russia and NATO exercises, they are playing to an inward-looking audience and undermining German leadership abroad.

Second, Britain’s vote to leave the EU further strengthens Berlin’s role in Europe, while at the same time robbing Germany of an established ally on economic policies and the sanctions on Russia. Berlin’s strengthened role will instill skepticism among allies that fear unchecked German power. For its part, Berlin has never felt entirely at ease with a leadership role and struggles to stand firm under fire. Germany’s strength could prove an illusion if its political class, discouraged by disapproval, refuses to act on it.

No, German strength is not an illusion, for five main reasons.

First, Germany is the largest country and has the most relevant economy in Europe. With the UK about the leave the EU, Germany will even more than before be a first among equals, as the two other big states—France and Italy—will be unable to rival Berlin’s economic and political influence.

Second, after the end of the Cold War, Germany was quickly able to redefine its role in the new world order. This in particular entails the ability to serve as a bridge between the United States and Russia. For many other countries (such as Italy), it took over twenty years to begin to figure out this role.

Third, German Chancellor Angela Merkel is the longest-serving and by far the most influential national leader in Europe. She is the one giving directions in times of trouble, as now with Brexit or previously with the migration crisis.

Fourth, Germans are at the top of the main EU institutions—European Parliament President Martin Schulz, European Parliament Secretary General Klaus Welle, and European External Action Service Secretary General Helga Schmid are only some examples—and are electors of many other, non-German leaders, such as the European Council’s Donald Tusk, the European Commission’s Jean-Claude Juncker and Alexander Italianer, or the European Central Bank’s Mario Draghi.

Last but not least, unlike Europe’s Southerners, German leaders are able when needed—despite domestic or personal differences—to work collectively to defend German interests, as has happened throughout recent economic crises.

Germany is strong. As strong as it wants to be. But Germany has three major problems.

First is history. While everybody blames Germany for not being ready to lead, the only time that European countries come together is when Germany tries to do just that. In short, everybody is against German leadership.

Second is also history. Germans of Chancellor Angela Merkel’s generation still feel guilty about Hitler and are extremely cautious to avoid being seen as too assertive.

Third is the illusion that appeasement, driven by economic interests, will work by finally tying Russia to Europe. The Rapallo syndrome—the suspicion that arises whenever Russia and Germany forge too close a relationship—has haunted Germany for too long, and there is no Otto von Bismarck (probably the last European leader who understood Russia) in sight.

German strength is mostly an illusion as there can hardly be a strong Germany in a weak European Union over the longer term.

On the one hand, member states have power in the institutions and processes of European integration, and Germany commands quite a good share of that. Deep integration such as the EU’s monetary union did not neutralize that strength but has contributed to it.

On the other hand, the power held by governments is mostly negative—the power to block or veto decisions. Shaping or innovating policy requires other capacities, namely agenda setting and coalition building. Germany’s strength depends considerably on its place and role at the geographic and political center of the EU.

Berlin is most capable when acting as part of a consensus group of member states that could outnumber possible veto coalitions and have the credibility to go ahead if the EU at large were incapable of delivering on crucial interests. Such a political center does not currently exist; it needs to come together for German strength to be put at the service of Europe.

Yes, the image of German strength that has developed over the last decade is an illusion.

First, power in the European Union is always on the side of the status quo. During the eurozone crisis, Germany successfully fought to maintain the status quo on issues such as fiscal union or euro bonds. Berlin experienced much greater difficulty when it tried to change the status quo, for example on migration and the Dublin Regulation on asylum applications. If power is measured in terms of ability to challenge the status quo, then German power is quite limited.

Second, Germany benefited from certain patterns in the global economy that helped hide deep structural weaknesses in the German economy. China was feeding its export engine, but now China is very close to the technology frontier and is starting to acquire stakes in vital German technology firms. Lack of structural reform will become more and more visible, and Germany shows no willingness to deal with the problem.

It is difficult to be optimistic about the German economy right now, which also makes me less optimistic than most forecasters about growth in the eurozone as a whole.

German strength is real. The country has a strong economy and finishes high in most global rankings. It is well governed and politically stable. Of course, everything is relative: wherever there is light, there is also shade. But overall, Germany clearly belongs to the winners of post-1989 globalization.

The challenge is to maintain this position. This requires investment. Germany must increasingly invest in maintaining and furthering the European and global order from which it profits so much. It must invest in developing infrastructure at home and in remaining on top of the economic game in the digital era.

But even if Germany is a strong country, it is an illusion to think that it could lead Europe alone. Germany needs equally solid partners in Europe. The main concern in Berlin at the moment is the weakness of the governments in France, Britain, and Poland, the European countries that matter most to Germany.

Germany is certainly a strong country by most objective measures. It has the largest population and economy in Europe and is the third-largest exporter in the world with the largest current-account surplus. Germany’s relative political strength has increased due to the decline of the UK and France as European powers. Berlin is in many respects Europe’s leader by default.

But it is not a major military power, and Germany’s economy remains vulnerable to outside forces given its disproportionate reliance on trade. It has major demographic problems as well, with an aging and declining population. And both its leaders and public understand the real limits to German leadership in Europe.

History has shown that no one hegemon can lead or rule Europe. Germans have learned the lessons that Otto von Bismarck taught—to avoid becoming too predominant and thereby creating countervailing coalitions. Germany’s political culture is also one of consensus, decentralization, and coalition building.

So yes, expectations that Berlin is the key player in the EU are correct, but Germany will lead from the middle and hope there are still partners that can share in this leadership. Germany’s partners of choice will be European, but it may have to build a partnership in leadership with Washington if its European options fail.

Germany’s strength is not an illusion but a crystal-clear reality. Unfortunately, however, Germany as a country is more unbalanced than many are willing to acknowledge.

From an economic standpoint, German strength is fueled by external cost competitiveness and a very high current-account surplus. But Germany’s economic prowess may be a victim of its own success: in recent years, good economic performance has allowed policymakers to avoid facing longer-term challenges, namely domestic productivity rising too slowly and investment falling far short of what is needed. In this view, the German government’s aim to achieve a balanced budget by the current fiscal year risks being evidence more of shortsightedness than of thrift.

On the political side, Germany appears keen to convey the image of a reluctant leader. However, like it or not, Berlin needs to prove itself as a proactive leader to bring the EU out of its current quagmire. If it fails, nationalistic and populist forces around Europe may undermine the very European process from which German prosperity and leadership emerged.

Not long ago, few people would have given much thought to whether Germany is strong or not. If they did, they were first and foremost thinking about how to guard Germany and keep it down, to forestall once and forever the possibility of Germans again bringing unspeakable harm to the continent and the world.

This has changed. Firmly bound into NATO for its security and profiting from European integration, Germany has developed into one of the world’s leading economic powerhouses. Germany is also taking up top positions with regard to its soft-power skills, as many rankings show.

Not surprisingly, then, there are calls for German leadership—albeit not deutsche Führerschaft. It is here that disillusionment with German strength comes into play. As a nation that celebrated its oblivion of power while at the same time competing hard for its advantages, Germany is still not grown-up enough to meet new expectations and become Europe’s indispensable and benign actor. To that end, it would need the help of other European nations, which will be difficult to obtain given their ambivalence toward Germany’s role.

For the time being, German strength therefore resembles that of the country’s football team in the Euro 2016 championship. Its technical performance was among the best, and Germany dominated the game. But the team did not score, frustrating itself and others.