Economies continue to buckle under the uncertainty that has engulfed the European Union since the sovereign debt crisis broke out in 2009. The crisis has created ongoing possibilities of a debt default contagion, bank collapse, Greece’s departure from the euro, and permanent derailment of the European integration process. Due to Germany’s strong economic performance, high employment, and current account surplus, Europe is counting on Berlin to lead the way toward ending the debt crisis.

Zhang Lihua, a resident scholar of Carnegie–Tsinghua, hosted a roundtable discussion with Rafał Ulatowski, an assistant professor from the Institute of International Relations at Warsaw University, to discuss Berlin’s response to the European debt crisis and the potential for further German involvement.

Germany’s Evolving Relations With the Rest of Europe

  • Defined by the Wars: Ulatowski stated that what Germany can do in foreign policy is constrained by its legacy from the first and second World Wars. He characterized Berlin’s foreign policy as “west-binding”—a strategy that began with West Germany’s attempt to integrate into Western Europe by becoming a civilian power. Upon reunification in 1990, Ulatowski explained that Germany’s goal was to be a “normal state” that wielded strong economic influence, in order to bring peace and then prosperity to Europe. Another Chinese scholar agreed that European integration was initially politically motivated and later became an economic coalition.
     
  • Transformation of Germany: Ulatowski explained how the German economy initially floundered under the pressure of reunification. He added that Germany was nicknamed the “sick man of Europe.” However, Ulatowski pointed out that the 2008 recession allowed Germany to reassert its position as a European economic powerhouse. Germany’s success, he explained, was due to former German chancellor Gerhard Schröder’s Agenda 2010 reforms and low interest rates in the eurozone. Demand for German exports had become integral to European growth for over a decade.

Germany’s Position on the Debt Crisis

  • One Size Does Not Fit All: Ulatowski stated that the rounds of financial rescue packages rolled out in response to the debt crisis have been fundamentally similar to one another. The result has not been positive for all countries. He explained that Germany has focused on austerity as a readjustment approach, while other countries increasingly recognize the need to stimulate the economy. In addition, a Chinese participant noted that the Germans are resistant to bailing out the Greeks due to a popular perception of Greek laziness.
     
  • No “Grexit” but Reform: Ulatowski explained that Germany’s national interests are at stake with the eurozone crisis. Therefore, he added, Germany will have to rescue the currency and come up with solutions for a working monetary union. A Chinese participant noted that this was similar to how the Chinese public understands the need for sweeping, sometimes difficult, economic and political reforms. This scholar added that European monetary and fiscal reforms were long overdue.
     
  • Lack of Vision for Europe: Ulatowski added that the lack of indication of where Berlin stands has left the rest of the Europe and the world with many questions. Stronger countries in the eurozone ask Germany for more while smaller countries felt that Berlin’s rhetoric has been harsh. He added that German Chancellor Angela Merkel seems to be more interested in getting out of the crisis than laying out a vision of a stronger EU.

Discussants included: Huan Qingzhi, Jiang Shixue, Tang Xiaoyang, Zhao Changhui