Germany has no intention of dropping its focus on exports to help boost the economies of its European Union partners, it said today, despite adopting a conciliatory tone towards France on EU economic management.
Ahead of this week's European Union summit, Chancellor Angela Merkel met France's Nicolas Sarkozy on Monday and agreed that Europe needed more economic government But top German officials quickly made clear this had to happen on German terms.
Merkel, who had long avoided talk of such government, said she and Sarkozy wanted all 27 EU states involved, and a German government official told a briefing on Tuesday that all economic matters would be up for discussion "from the top down".
The fact that Sarkozy had agreed to an EU-wide forum instead of government by the 16 euro zone nations was hailed by German media as a victory for Merkel.
Officials in Berlin gave notice that Germany would seek to shape policy in its own image.
“Our position is that Europe is competing with other regions of this world. Therefore it's about all of us getting better. But some need to get better more than others,” said one of the officials in Berlin, speaking on condition of anonymity.
"Merkel will meet EU leaders on Thursday in Brussels, where there is a good chance of a joint European position emerging for a G20 summit in Toronto on the introduction of a banking levy and financial transaction tax," the official said.
After a string of recent splits between France and Germany on the EU's response to the crisis, Monday's meeting was seen as a show of solidarity.
But for Karl-Heinz Nassmacher, political scientist at the University of Oldenburg, Merkel is marshalling northern allies against the Mediterranean member states, including France.
“By insisting on (economic government by) all 27, Merkel is trying to get the likes of Britain and Sweden on her side, which are more reliable than the southern countries,” he said.
“This is not a blockade. But Berlin doesn't want the upper hand being taken by Italy, Spain and France which basically want things to go on as before,” Nassmacher said.
Merkel has been under intense domestic pressure to stop German taxpayers' money being used to rescue states like Greece, whose financial woes have landed the euro in trouble.
At the same time, France, Germany's biggest trading partner, has accused Berlin of upsetting Europe's economic equilibrium by pursuing policies tailored excessively towards fostering export competitiveness at the expense of other countries.
Instead, Paris argues that Germany must do more to support domestic demand by relaxing curbs on wage growth, which will enable other nations to compete more effectively.
The government official said it was up to those countries who were behind to improve, not vice versa.
“A part of the economic government is to discuss imbalances in the EU, albeit with a focus on those who have deficits. The current account is a part of this,” he said.
He said Berlin favoured government of the 27 because states' competitiveness affected the whole union and trade with Germany, citing non-euro countries like Poland. “Plus, nearly all big decisions had to be made by all 27,” he added.
Sarkozy had also shown greater willingness to consider changes to the EU treaty that would permit the bloc to suspend states' voting rights, the official said, noting that Germany did not want any new institutions to be created in the EU.
“It's about improving coordination within the EU,” he said.
“Spain, whose finances have sparked concern on financial markets, was unlikely to play a role in the EU summit,” he said.
“Agreeing to consider changes in the EU treaty had cost Sarkozy very little,” said Nassmacher in Oldenburg.
“You can promise blue skies all you like, but Sarkozy knows he can rely on others to block that. He knows nothing that involves the consent of all 27 states can be rammed through I don't see any change in the situation, merely a change in the atmosphere,” he added. “It was necessary though.”