Germany flexes muscle, loses friends

At next week’s EU summit in Brussels, you can expect the usual photos of backslapping European leaders sharing broad laughs and whispered asides. But behind closed doors, things are likely to be a lot frostier: by all indications, personal relations among EU power players are at a nadir. Jean-Claude Juncker, prime minister of Luxembourg, has just deployed the spikiest insult in the EU lexicon against German chancellor Angela Merkel: The German government, Juncker told the German newspaper Die Zeit, was handling its European business in an “un-European manner.” Juncker added, “Germany’s thinking is a bit simple.” In über-diplomatic, consensus-obsessed Europe, where disapproval is usually expressed by arched eyebrows and significant silences, it’s rare for someone to draw a line in the continental sandbox quite so clearly.

(And it’s not only from abroad that Merkel is facing criticism. Former German chancellor Helmut Schmidt added some incendiary remarks of his own in an interview with David Marsh for German business newspaper Handelsblatt. Asked about the conservative German central bankers on whom Merkel is known to rely on for advice, Schmidt gave his harsh verdict: “In their innermost hearts, they are reactionaries. They are against European integration.”)

Juncker’s outburst came in response to Merkel’s outright rejection of his proposal to allow establish joint “Euro bonds” that could reduce the borrowing costs of debt-burdened EU member states.

And, in truth, it is getting harder to see what the German endgame is. Berlin is professing that Europe’s troubled economies can and should secure long-term growth by means of fiscal discipline and improved “competitiveness.” That’s fine in theory, but it doesn’t explain how Ireland, Portugal and Spain are supposed to service their existing debt in the face of rising borrowing costs and sinking tax revenue.

Of course, what it does ensure is that Germany will maintain its relative economic dominance. Germany’s hardball no doubt appeals to some of Merkel’s domestic constituencies, but it may condemn the euro to history’s scrap heap, while doing irreparable damage to Berlin’s relations with its neighbors. Merkel should enjoy the pleasantries and chit-chat on the sidelines of next week’s EU summit, but she shouldn’t take them for granted.