“The “Schism” Between East And West Is More Dangerous Than The One Between North And South”

Germany will have to accept greater responsibility within the EU and in the worldJoachim Bitterlich was a German diplomat and advisor to former Chancellor Helmut Kohl

“The European leaders will also have to deal with insuring and enlarging a multilateral open system for trade, threatened not only by the US policies, which will lead to Germany having to accept more responsibility within the EU and in the world – and this includes not only the fields of economy and finance,” says Joachim Bitterlich, who was advisor to former Chancellor Helmut Kohl and is currently Professor at the ESCP School in Paris.

Q: Catalonia has been more than six months without a government. You say you feel quite pessimistic about Catalonia… also about Madrid. Do you see a solution on the horizon?

A: I am worried to a certain extent because of the events in Catalonia, a problem which I’ve seen during my stay in Spain and before that. An upcoming problem which in my view has been neglected to some extent by the central government and others. They concentrated in the past on the Basque problem, and much less on the Catalan problem. But it was on the cards this would come back again at some point. In my time as ambassador and political advisor in Spain I talked in the Basque country about federalism. It was high risk but people accepted it. The PNV accepted what I was presenting as ideas for federalism in Spain. An interesting fact: I practically repeated that speech in Barcelona and half of the people said that was the approach they were expecting and the other half was against it. I am preoccupied by the fact that Madrid is not reacting or taking action in this area. Instead of proposing what I call a solution to this. I have been talking to German investors in Catalonia and Spain and they are very concerned because of the situation. Should they stay in Catalonia or not? Should they relocate elsewhere in Spain or even leave Spain? And Spain has made a big effort over the last few years to stabilize its political and, particularly, its economic situation. Should these efforts be in vain?

Q: Let’s talk about Europe. Does it worry you to?

A: You can always tell people that Europe is a mission impossible to some extent. If you look at the crisis of the last ten years, at the loss of ability to discuss and act in the areas of foreign and security policy, when you look at the crisis in the banking sector, which is not totally over; when you look at certain crises in the areas of economic models in different European states… And if you look at the rift between East and West, North and South, you may say it’s mission impossible. But as a matter of fact, Europe seen from the outside, the reality, is a bit better. Therefore I am a pragmatic optimist. Because it’s not so difficult to look at the chapters of what I call European self assertion: internal and external security, and the economy, including the Eurozone. What people in Europe need is confidence, security and solutions. Not ideological approaches but practical solutions.

Q: After the formation of the new German government, both the confidence indicators and the PMIs seem to have fallen. Aren’t business men convinced by the coalition agreement?

A: It is true German business has not been enthusiastic about the new German coalition government and its 177-pages basic “contract”, which seems to be a large concession to the Social Democrats, helping them to overcome the scepticism within the party towards renewing the Grand Coalition with the Christian Democrats. But business is confident that this government will not act against vital interests of the German economy.

The personalities making up the new government seem to instill even more confidence than their predecessors in this typical German government incorporating a certain national consensus. There will still be highly difficult and sensitive subjects such as migration or the energy transition to settle and overcome. At least this old and new coalition is bound together by the aversion to new elections and the risk of strengthening even further the extreme right party, the AfD.

And the leading parties seem to have understood the critical signal in the last general elections, the “yellow card” from the German electorate. To some extent it is even astonishing that the Christian Democrats have launched first, ahead of their Social Democratic partner, a major discussion about renewing the party programme and structures under the chairmanship of the newly appointed Secretary General, Ms Annegret Kramp-Karrenbauer. She is – at least for the moment – the favourite to succeed Angela Merkel.

Q: Is Emmanuel Macron Europe’s poster boy? 

A: He has been extremely courageous. It is something new in Europe to try to win elections with Europe at the  top of your agenda. It has never happened before in another big country. Macron has taken that risk and has presented some ideas which will have to be discussed with his partners and allies. The French sometimes think that when they have an idea we have to accept it…but no, it has to be discussed with Germany, Spain, Italy and the others. But I see a window of opportunity in the second half of this year to discuss a road map for Europe for the years to come with Germany’s new government.

Q: What would that road map look like?

A: It should be built upon the triple idea of firstly giving more security to the EU, the European populations, especially in areas of internal security, including police and intelligence cooperation, protection of external borders, immigration including legal immigration and the revision of the European asylum system. Secondly, external security and defense via a roadmap in favour of strengthening military cooperation and developing more towards common units and equipment, and by reinforcing the common neighbourhood policy and revising the common approach towards Africa. And finally economic security by creating better tools, in particular for protecting European strategic assets, promoting investment and innovation in order to assure the “self assertion” of the European economy in a globalized economy with difficult partners such as the US or China. We may call this a “pact” for protecting Europe in order to re-establish the confidence of the member states and of the European populations.This will not be by far the only agenda facing European leaders, they will have to deal with the growing European “schism” between East and West, perhaps more dangerous than the classical differences between North and South. They will have to deal with insuring and enlarging a multilateral open system for trade, threatened not only by the US policies.

 Q:Will this lead to Germany having to accept more responsibility?

A: Yes, the “reluctant hemegon” Germany will have to accept greater responsibility within the EU and in the world – and this includes not only the fields of economy and finance. But perhaps even more so in foreign and security policy where the Germans have to overcome their political culture of self-restraint and become at least more compatible with that of France and other partners. And this could be the main challenge facing the German Social Democrats along with their relationship with “the economy.”

Q: Speaking of roadmaps, president Macron is pushing to put these three concepts on the table: debt mutualisation, a ministry of Finance and a European Monetary Fund. What is your take on them?

A: I would be in favour of the last one. To develop the EMS towards a European Monetary Fund I think is the logical consequence of economic and monetary union in Europe. This is the most important issue. I don’t know whether creating a European Finance Minister in the short or medium-term is necessary or the right solution. The finance minister is the guarantor of your national budget, but this European finance minister will not dispose of the budget of the European Union or of that of member states. And the same applies to a Eurozone budget. It will be extremely complicated to establish one.

Q: Why?

A: Who would control it? National parliaments or the European Parliament? Would the Comission be involved? And what about the member states? What would be the subjects? I would prefer to return to an old idea, a Spanish one by the way, proposed by Felipe González in the late 1980s. He put forward the idea of developing a European Cohesion Fund, dealing with practically the same subjects and the same ideas we are discussing today. A sort of fund helping member states in difficulty or encouraging others who are emerging from a crisis. This idea has been used by members states: everyone wanted to have a bit of this fund. Jean Claude Juncker has also proposed some ideas which are similar to this: a certain basic fund for Europe in order to help member states in difficulties or member states which are just coming out of difficulties.

Q: Wouldn’t a common debt instrument be a perfect way to do that?

A: I have serious doubts about that. Being a typical German if you like (he laughs). Look at the EMS. There is an obligation and a guarantee from the Germans which is more than half of Germany’s annual budget. And the Germans would like to control this even in the future. What they are afraid of is giving a guarantee to a third country without being able to control it. That is why a common debt instrument is viewed with mistrust.

Q: They feel it’s too risky…

A: Yes. This could happen in the future but I don’t see the need today. We need other instruments first.

Q: Like instruments for the insolvency of a state?

A: Exactly, because there are none. In Germany, there is no guarantee of insolvency for the Länder. So they say why the hell when we look at the banking sector should we guarantee the risky loans of Italian banks? It is above 20 percent, while in Germany it is around 2-3 percent, even if the German banking sector is not in excellent health. Spain has made big efforts, but we have not been helping Spain, we are limited. Should we now guarantee Italy or Greece or Cyprus? When you ask a German if he knows about the term austerity, austerität, he doesn’t. We call it a balanced budget between income and expenditure.

Q: What is Germany ready for?

A: Well, for example, Germany will be ready to transform the European Stability Mechanism progressively towards a sort of European Monetary Fund, but without transferring new competences to Brussels! Germany will look at Banking Union with its expressed scepticism, asking first for the further reduction of risk within the banking system of certain member states before embarking on any potential next steps.

Both governing parties absolutely want to avoid any “through pass“ for the euro-sceptics in their own ranks and for the extreme right! On the other hand, Germany seems to be ready to discuss about reinforcing its contribution to the EU-budget, especially in order to strengthen cohesion and to assist countries under structural pressure – but these amounts will not be able to compensate entirely the losses after the UK’s departure! The debate about the future outline of the EU budget will therefore be more difficult and with more tensions than in the past!

The answer to the French President’s proposals last September cannot be as enthusiastic as hoped by Paris – but in my view it will still be possible to develop up until June, together with Paris, a wide-ranging European roadmap for the coming years and submit these proposals for discussion with their European partners – an agenda which is perhaps less far reaching than that conceived by some optimists in Brussels and Paris, but still substantial and probably more suitable for obtaining the agreement of the partners.

Q: It sounds as if Jens Weidmann will be the next ECB’s president. How would that shape the eurozone’s monetary policy?

A: I don’t have any information about that. It’s clear that the Germans are in the position to hold the presidency for once. I remember in 1998 I said to my boss, former Chancellor Helmut Kohl: the best possible candidate for a European Central bank president in its early years would be Hans Tietmeyer, the most recognized central banker in Europe at that time. He said: “Mmm no. You are perhaps right, he is perhaps the best, but it would be too much for the others. We have the central bank in Frankfurt, we have established the economic and monetary union on the basis of a German system, the deutschmark has become European, but a German central banker on top would be too much. Let’s wait for the right moment, when the time is right. I don’t know if right now the others would accept it, and particularly accept that Jens Weidmann would be the central banker since he is considered an orthodox. The French and you Spaniards could also put forward a candidate, I would not exclude that. The irony is that the French candidate is not only French but German. He was born in Germany and he knows both nations extremely well. He could be what I call ‘the passeur’, the man between the nations.

Q: In Spain we find the so-called “Renanian capitalism” very interesting, with this double-board, both executive and supervisory, management system. But some Spanish board members believe that German businessmen today would prefer to change the system… and this is one of the reasons why they did not want to “export” this model to the rest of Europe. Do you agree?

A: The German system with its – in your words – “double board” is part of the German success story after World War II. Introduced, or better said imposed, by the Allies with its key element, the “co-determination” of trade unions, the aim had been to weaken the German industrial basis. But the German economy has accepted this system and made the best of it. Its prerequisites are less understandable by the French neighbours and by the south of Europe. It’s the cooperation between the management or the employer and the trade unions within the company and within the “double board,” this being the expression of a company’s “social responsibility” towards its employees.

A newly appointed French CEO in Germany asked me once whether he could accept the invitation from the shop steward of his company. My answer was, of course, – and if s.o. in Paris finds it strange, tell them you were following the sound advice of the advisor to their Chancellor. The morning after he called me, still astonished by the evening where the unions’ man was raising his glass in a toast to strong cooperation to ensure the company’s success, adding his willingness to overcome the natural divergences through permanent dialogue.

Following my advice, the conclusion to that evening had been a weekly informal meeting between the two personalities, alternating between the office of the works council and that of the CEO. This relationship – amongst others – has been decisive for that company’s entry into East Germany from spring 1990 on… Perhaps a typical illustration of the strength of the German system, underestimated by many foreigners.

 Q:You have been involved on several boards so far. Tell me about your personal experience…

A: Another example has been my own “role“ on a German supervisory board, progressively becoming the “moderator“ or “go between“ for the German trade unions and one of the shareholders, a French multinational which never understood how to deal with cooperative, but demanding German trade unions within a typical German environment.

However, it is true that for a certain number of German companies acting internationally, and with a majority of non-German shareholders, this sytem seems, especially with regard to the supervisory board, too heavy, too bureaucratic and too time consuming. So some German companies have adapted and changed their status to a “SE – Societas Europae“ where the strict German rules of representation “on equal footing“ are not fully applied.

Today these two systems co-exist, but this cannot belie the successful nature of the German system of “co-determination” and of the “double board”! Perhaps even France, Italy or Spain could strengthen their economies by learning from this German system. At least part of the trade unions in these countries seem to be prepared to get involved in this new scheme of cooperation. At least it helps to develop the future of a company via consensus and is more resiliant to a certain degree of nepotism and cronyism existing in the more “latin” systems.

 

 

 

 

 

 

 

 

 

 

 

 

 

About the Author

Ana Fuentes
Ana Fuentes is The Corner Editor-in-Chief. Currently based in Madrid, she has been a correspondent in New York, Beijing and Paris for several international media outlets such as Prisa Radio, Radio Netherlands or CNN en español. Ana holds a degree in Journalism from the Complutense University in Madrid and the Sorbonne University in Paris, and a Masters in Journalism from Spanish newspaper El País. You can contact her at: anaf[at]thecorner.eu