Germany’s Dystopian Plans for Europe: From Fantasy to Reality?

By Thomas Fazi, a writer, activist and award-winning filmmaker. He is the author of The Battle for Europe: How an Elite Hijacked a Continent – and How We Can Take It Back, published by Pluto Press. He is a regular contributor to Social Europe Journal, il manifesto, Green European Journal and other journals. He collaborates with the Italian civil society network Sbilanciamoci!. His website is Originally published at openDemocracy

After Emmanuel Macron’s election in France, many (including myself) claimed that this signalled a revival of the Franco-German alliance and a renewed impetus for Europe’s process of top-down economic and political integration – a fact that was claimed by most commentators and politicians, beholden as they are to the Europeanist narrative, to be an unambiguously positive development.

Among the allegedly ‘overdue’ reforms that were said to be on the table was the creation of a pseudo-‘fiscal union’ backed by a (meagre) ‘euro budget’, along with the creation of a ‘European finance minister’, the centre-points of Macron’s plans to ‘re-found the EU’ – a proposal that raises a number of very worrying issues from both political and economic standpoints, which I have discussed at length elsewhere.

The integrationists’ (unwarranted) optimism, however, was short-lived. The result of the German elections, which saw the surge of two rabidly anti-integrationist parties, the right-wing FDP and extreme right AfD; the recent collapse of coalition talks between Merkel’s CDU, the FDP and the Greens, which most likely means an interim government for weeks if not months, possibly leading to new elections (which polls show would bring roughly the same result as the September election); and the growing restlessness in Germany towards the 13-year-long rule of Macron’s partner in reform Angela Merkel, means that any plans that Merkel and Macron may have sketched out behind the scenes to further integrate policies at the European level are now, almost certainly, dead in the water. Thus, even the sorry excuse for a fiscal union proposed by Macron is now off the table, according to most commentators.

At this point, the German government’s most likely course in terms of European policy – the one that has the best chance of garnering cross-party support, regardless of the outcome of the coalition talks (or of new elections) – is the ‘minimalist’ approach set in stone by the country’s infamous and now-former finance minister, Wolfgang Schäuble, in a ‘non-paper’ published shortly before his resignation.

The main pillar of Schäuble’s proposal – a long-time obsession of his – consists in giving the European Stability Mechanism (ESM), which would go on to become a ‘European Monetary Fund’, the power to monitor (and, ideally, enforce) compliance with the Fiscal Compact. This echoes Schäuble’s previous calls for the creation of a European budget commissioner with the power to reject national budgets – a supranational fiscal enforcer.

The aim is all too clear: to further erode what little sovereignty and autonomy member states have left, particularly in the area of fiscal policy, and to facilitate the imposition of neoliberal ‘structural reforms’ – flexibilisation of labour markets, reduction of collective bargaining rights, etc. – on reluctant countries.

To this end, the German authorities even want to make the receipt of EU cohesion funds conditional on the implementation of such reforms, tightening the existing arrangements even further. Moreover, as noted by Simon Wren-Lewis, the political conflict of interest of having an institution lending within the eurozone would end up imposing severe austerity bias on the recovering country.

Until recently, these proposals failed to materialise due, among other reasons, to France’s opposition to any further overt reductions of national sovereignty in the area of budgetary policy; Macron, however, staunchly rejects France’s traditional souverainiste stance, embracing instead what he calls ‘European sovereignty’, and thus represents the perfect ally for Germany’s plans.

Another proposal that goes in the same direction is the German Council for Economic Experts’ plan to curtail banks’ sovereign bond holdings. Ostensibly aimed at ‘severing the link between banks and government’ and ‘ensuring long-term debt sustainability’, it calls for: (i) removing the exemption from risk-weighting for sovereign exposures, which essentially means that government bonds would no longer be considered a risk-free asset for banks (as they are now under Basel rules), but would be ‘weighted’ according to the ‘sovereign default risk’ of the country in question (as determined by credit rating agencies); (ii) putting a cap on the overall risk-weighted sovereign exposure of banks; and (iii) introducing an automatic ‘sovereign insolvency mechanism’ that would essentially extend to sovereigns the bail-in rule introduced for banks by the banking union, meaning that if a country requires financial assistance from the ESM, for whichever reason, it will have to lengthen its sovereign bond maturities (reducing the market value of those bonds and causing severe losses for all bondholders) and, if necessary, impose a nominal ‘haircut’ on private creditors.

As noted by the German economist Peter Bofinger, the only member of the German Council of Economic Experts to vote against the sovereign bail-in plan, this would almost certainly ignite a 2012-style self-fulfilling sovereign debt crisis, as periphery countries’ bond yields would quickly rise to unsustainable levels, making it increasingly hard for governments to roll over maturing debt at reasonable prices and eventually forcing them to turn to the ESM for help, which would entail even heavier losses for their banks and an even heavier dose of austerity.

It would essentially amount to a return to the pre-2012 status quo, with governments once again subject to the supposed ‘discipline’ of the markets, particularly in the context of a likely tapering of the ECB’s quantitative easing (QE) program. The aim of this proposal is the same as that of Schäuble’s ‘European Monetary Fund’: to force member states to implement permanent austerity.

Of course, national sovereignty in a number of areas – most notably fiscal policy – has already been severely eroded by the complex system of new laws, rules and agreements introduced in recent years, including but not limited to the six-pack, two-pack, Fiscal Compact, European Semester and Macroeconomic Imbalances Procedure (MIP).

As a result of this new post-Maastricht system of European economic governance, the European Union has effectively become a sovereign power with the authority to impose budgetary rules and structural reforms on member states outside democratic procedures and without democratic control.

The EU’s embedded quasi-constitutionalism and inherent (structural) democratic deficit has thus evolved into an even more anti-democratic form of ‘authoritarian constitutionalism’ that is breaking away with elements of formal democracy as well, leading some observers to suggest that the EU ‘may easily become the postdemocratic prototype and even a pre-dictatorial governance structure against national sovereignty and democracies’.

To give an example, with the launch of the European Semester, the EU’s key tool for economic policy guidance and surveillance, an area that has historically been a bastion of national sovereignty – old-age pensions – has now fallen under the purview of supranational monitoring as well. Countries are now expected to (and face sanctions if they don’t): (i) increase the retirement age and link it with life expectancy; (ii) reduce early retirement schemes, improve the employability of older workers and promote lifelong learning; (iii) support complementary private savings to enhance retirement incomes; and (iv) avoid adopting pension-related measures that undermine the long term sustainability and adequacy of public finances.

This has led to the introduction in various countries of several types of automatic stabilizing mechanisms (ASMs) in pension systems, which change the policy default so that benefits or contributions adjust automatically to adverse demographic and economic conditions without direct intervention by politicians. Similar ‘automatic correction mechanisms’ in relation to fiscal policy can be found in the Fiscal Compact.

The aim of all these ‘automatic mechanisms’ is clearly to put the economy on ‘autopilot’, thus removing any element of democratic discussion and/or decision-making at either the European or national level. These changes have already transformed European states into ‘semi-sovereign’ entities, at best. In this sense, the proposals currently under discussion would mark the definitive transformation of European states from semi-sovereign to de facto (and increasingly de jure) non-sovereign entities.

Regardless of the lip service paid by national and European officials to the need for further reductions of national sovereignty to go hand in hand with a greater ‘democratisation’ of the euro area, the reforms currently on the table can, in fact, be considered the final stage in the thirty-year-long war on democracy and national sovereignty waged by the European elites, aimed at constraining the ability of popular-democratic powers to influence economic policy, thus enabling the imposition of neoliberal policies that would not have otherwise been politically feasible.

In this sense, the European economic and monetary integration process should be viewed, to a large degree, as a class-based and inherently neoliberal project pursued by all national capitals as well as transnational (financial) capital. However, to grasp the processes of restructuring under way in Europe, we need to go beyond the simplistic capital/labour dichotomy that underlies many critical analyses of the EU and eurozone, which view EU/EMU policies as the expression of a unitary and coherent transnational (post-national) European capitalist class.

The process underway can only be understood through the lens of the geopolitical-economic tensions and conflicts between leading capitalist states and regional blocs, and the conflicting interests between the different financial/industrial capital fractions located in those states, which have always characterised the European economy. In particular, it means looking at Germany’s historic struggle for economic hegemony over the European continent.

It is no secret that Germany is today the leading economic and political power in Europe, just as it is no secret that nothing gets done in Europe without Germany’s seal of approval. In fact, it is commonplace to come across references to Germany’s ‘new empire’. A controversial Der Spiegel editorial from a few years back event went as far as arguing that it is not out place to talk of the rise of a ‘Fourth Reich’:

That may sound absurd given that today’s Germany is a successful democracy without a trace of national-socialism – and that no one would actually associate Merkel with Nazism. But further reflection on the word ‘Reich’, or empire, may not be entirely out of place. The term refers to a dominion, with a central power exerting control over many different peoples. According to this definition, would it be wrong to speak of a German Reich in the economic realm?

More recently, an article in Politico Europe – co-owned by the German media magnate Axel Springer AG – candidly explained why ‘Greece is de facto a German colony’. It noted how, despite Tsipras’ pleas for debt relief, the Greek leader ‘has little choice but to heed the wishes of his “colonial” masters’, i.e., the Germans.

This is because public debt in the eurozone is used as a political tool – a disciplining tool – to get governments to implement socially harmful policies (and to get citizens to accept these policies by portraying them as inevitable), which explains why Germany continues to refuse to seriously consider any form of debt relief for Greece, despite the various commitments and promises to that end made in recent years: debt is the chain that keeps Greece (and other member states) from straying ‘off course’.

Even though the power exercised by Europe’s ‘colonial masters’ is now openly acknowledged by the mainstream press, it is however commonplace to ascribe Germany’s dominant position as an accident of history: according to this narrative, we are in the presence of an ‘accidental empire’, one that is not the result of a general plan but that emerged almost by chance – even against Germany’s wishes – as a result of the euro’s design faults, which have allowed Germany and its satellites to pursue a neo-mercantilist strategy and thus accumulate huge current account surpluses.

Now, it is certainly true that the euro’s design – strongly influenced by Germany – inevitably benefits export-led economies such as Germany over more internal demand-oriented economies, such as those of southern Europe. However, there is ample evidence to support the argument that Germany, far from having accidently stumbled upon European dominance, has been actively and consciously pursuing an expansionary and imperialist strategy in – and through – the European Union for decades.

Even if we limit our analysis to Germany’s post-crisis policies (though there is much that could be said about Germany’s post-reunification policies and subsequent offshoring of production to Eastern Europe in the 1990s), it would be very naïve to view Germany’s inflexibility – on austerity, for example – as a simple case of ideological stubbornness, considering the extent to which the policies in question have benefited Germany (and to a lesser extent France).

Germany (and France) have been the main beneficiaries of the sovereign bailouts of periphery countries, which essentially amounted to a covert bailout of German (and French) banks, as most of the funds were channelled back to the creditor countries’ banks, which were heavily exposed to the banks (and to a lesser degree the governments) of periphery countries. German policy, Helen Thompson wrote, overwhelmingly ‘served the interests of the German banks’.

This is a telling example of how Germany’s policies (and the EU’s policies more in general), while nominally ordoliberal – i.e., based upon minimal government intervention and a strict rules-based regime – are in reality based on extensive state intervention on behalf of German capital, at both the domestic and European level.

As Andy Storey notes, not only did the German government, throughout the crisis, show a blatant disregard for ordoliberalism’s non-interference of public institutions in the workings of the market, by engaging in a massive Keynesian-style programme in the aftermath of the financial crisis and pushing through bailout programmes that largely absolved German banks from their responsibility for reckless lending to Greece and other countries; German authorities have also been more than happy to go along with – or to encourage – the European institutions’ ‘exercise of unrestrained executive power and the more or less complete abandonment of strict, rules-based frameworks’ – Storey is here referring in particular to the ECB’s use of its currency-issuing monopoly to force member states to follows its precepts – ‘to maintain the profitability of German banks, German hegemony within the Eurozone, or even the survival of the Eurozone itself’.

Germany (and France) are also the main beneficiaries of the ongoing process of ‘mezzogiornification’ of periphery countries – often compounded by troika-forced privatisations –, which in recent years has allowed German and French firms to take over a huge number of businesses (or stakes therewithin) in periphery countries, often at bargain prices. A well-publicised case is that of the 14 Greek regional airports taken over by the German airport operator Fraport.

France’s corporate offensive in Italy is another good example: in the last five years, French companies have engaged in 177 Italian takeovers, for a total value of $41.8 billion, six times Italy’s purchases in France over the same period. This is leading to an increased ‘centralisation’ of European capital, characterised by a gradual concentration of capital and production in Germany and other core countries – in the logistical and distribution sectors, for example – and more in general to an increasingly imbalanced relationship between the stronger and weaker countries of the union.

These transformations cannot simply be described as processes without a subject: while there are undoubtedly structural reasons involved – countries with better developed economies of scale, such as Germany and France, were bound to benefit more than others from the reduction in tariffs and barriers associated with the introduction of the single currency – we also have to acknowledge that there are loci of economic-politic power that are actively driving and shaping these imperialist processes, which must be viewed through the lens of the unresolved inter-capitalist struggle between core-based and periphery-based capital.

From this perspective, the dichotomy that is often raised in European public discourse between nationalism and Europeanism is deeply flawed. The two, in fact, often go hand in hand. In Germany’s case, for example, Europeanism has provided the country’s elites with the perfect alibi to conceal their hegemonic project behind the ideological veil of ‘European integration’. Ironically, the European Union – allegedly created as an antidote to the vicious nationalisms of the twentieth century – has been the tool through which Germany has been able to achieve the ‘new European order’ that Nazi ideologues had theorised in the 1930s and early 1940s.

In short, the European Union should indeed be viewed a transnational capitalist project, but one that is subordinated to a clear state-centred hierarchy of power, with Germany in the dominant position. In this sense, the national elites in periphery countries that have supported Germany’s hegemonic project (and continue to do so, first and foremost through their support to European integration) can thus be likened to the comprador bourgeoisie of the old colonial system – sections of a country’s elite and middle class allied with foreign interests in exchange for a subordinated role within the dominant hierarchy of power.

From this point of view, the likely revival of the Franco-German bloc is a very worrying development, since it heralds a consolidation of the German-led European imperialist bloc – and a further ‘Germanification’ of the continent. This development cannot be understood independently of the momentous shifts that are taking place in global political economy – namely the organic crisis of neoliberal globalisation, which is leading to increased tensions between the various fractions of international capital, most notably between the US and Germany.

Trump’s repeated criticisms of Germany’s beggar-thy-neighbour mercantilist policies should be understood in this light. The same goes for Angela Merkel’s recent call – much celebrated by the mainstream press – for a stronger Europe to counter Trump’s unilateralism. Merkel’s aim is not, of course, that of making ‘Europe’ stronger, but rather of strengthening Germany’s dominant position vis-à-vis the other world powers (the US but also China) through the consolidation of Germany’s control of the European continental economy, in the context of an intensification of global inter-capitalist competition.

This has now become an imperative for Germany, especially since Trump has dared to openly challenge the self-justifying ideology which sustains Germany’s mercantilism – a particular form of economic nationalism that Hans Kundnani has dubbedExportnationalismus’, founded upon the belief that Germany’s massive trade surplus is uniquely the result of Germany’s manufacturing excellence (Modell Deutschland) rather than, in fact, the result of unfair trade practices.

This is why, if Germany wants to maintain its hegemonic position on the continent, it must break with the US and tighten the bolts of the European workhouse. To this end, it needs to seize control of the most coveted institution of them all – the ECB –, which hitherto has never been under direct German control (though the Bundesbank exercises considerable influence over it, as is well known). Indeed, many commentators openly acknowledge that Merkel now has her eyes on the ECB’s presidency. This would effectively put Germany directly at the helm of European economic policy.

Even more worryingly, Germany is not simply aiming at expanding its economic control over the European continent; it is also taking steps for greater European military ‘cooperation’ – under the German aegis, of course. As a recent article in Foreign Policy revealed, ‘Germany is quietly building a European army under its command’.

This year Germany and two of its European allies, the Czech Republic and Romania, announced the integration of their armed forces, under the control of the Bundeswehr. In doing so, the will follow in the footsteps of two Dutch brigades, one of which has already joined the Bundeswehr’s Rapid Response Forces Division and another that has been integrated into the Bundeswehr’s 1st Armored Division.

In other words, Germany already effectively controls the armies of four countries. And the initiative, Foreign Policy notes, ‘is likely to grow’. This is not surprising: if Germany (‘the EU’) wants to become truly autonomous from the US, it needs to acquire military sovereignty, which it currently lacks.

Europe is thus at a crossroads: the choice that left-wing and popular forces, and periphery countries more generally, face is between (a) accepting Europe’s transition to a fully post-democratic, hyper-competitive, German-led continental system, in which member states (except for those at the helm of the project) will be deprived of all sovereignty and autonomy, in exchange for a formal democratic façade at the supranational level, and its workers subject to ever-growing levels of exploitation; or (b) regaining national sovereignty and autonomy at the national level, with all the short-term risks that such a strategy entails, as the only way to restore democracy, popular sovereignty and socioeconomic dignity. In short, the choice is between European post-democracy or post-European democracy.

There is no third way. Especially in view of the growing tensions between Germany, the US and China, periphery countries should ask themselves if they want to be simple pawns in this ‘New Great Game’ or if they want to take their destinies into their own hands.


Some portions of this article previously appeared in this article published by Green European Journal.

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  1. Matthew G. Saroff

    It appears, that for Merkel at least, the left wing Die Linke party is beyond the pale.

    If I were her, I’d include them in talks, if just to get leverage against the FDP.

    1. Sid Finster

      Ain’t gonna happen. It would be the equivalent of asking ‘OK, which one of you just farted?” during an audience with the Pope.

      Some things cannot be acknowledged, especially among Europeans, who have created a political system based almost entirely on pretense. Even if the assembled petitioners are turning green and retching from the rancid stank and the Holy Father has s stupid grin on his mug, everyone has to carry on like everything is normal.

      Because Europe is so committed the pretense of “More Europe!”, to “fake it until you make it”, it is particularly bad form to point out that Europe is faking it.

      1. Matthew G. Saroff

        BTW, I am quoting your comment on my blog, because it is just so beautiful.

        You win the internet today.

  2. vteodorescu

    Well, I wholeheartedly agree with the view of the author, and also with the final recommendation: for countries to move to a post-European democracy.

    However, it is difficult to see any of them doing it, realistically. I am afraid that the prison doors have been shut and locked cca AD 1999, when the euro was firmly agreed upon. If the UK, which has its own currency and no great sympathy for the EU, has a tough time of it, the other countries stand no chance. There are still people in Greece that think the Euro is a Good Thing, God bless them!

    Short of a catastrophic external event, the EU (Germany/France as per the article) is doing very well on its path to austerian empire.

  3. PlutoniumKun

    Especially in view of the growing tensions between Germany, the US and China, periphery countries should ask themselves if they want to be simple pawns in this ‘New Great Game’ or if they want to take their destinies into their own hands.

    Yeah, that really worked out well for small European countries in 1939.

  4. Synoia

    The basis of this thesis was plain when the ECB was placed in Germany.

    The Economic regime is: Germany books the profits, and you lazy (non Germans) book the losses.

    Welcome to the neoliberal roots of the next 30 years war. The 30 years war was the imposition of the ruler’s denomination, Catholicism, on the people. This next 30 years one is imposing asset stripping (rent extraction) on the people and enriching a few Aristocrats, as a dogma.

    Now do you understand Brexit? Do you believe the British could not see this coming?

    I’ll repeat: This was the obvious outcome when the ECB was placed in Germany. I’m English and discussed this very topic with my family and friends there, and there was general agreement that German ambition would pave the path.

    Those who don’t know their history are condemned to repeat it.

    1. The Rev Kev

      Now do you understand Brexit? Do you believe the British could not see this coming?

      Exactly. Those average British voters weren’t stupid as claimed. If the EU/Germans are trying to do this whose aims are, and I quote:
      “to further erode what little sovereignty and autonomy member states have left, particularly in the area of fiscal policy, and to facilitate the imposition of neoliberal ‘structural reforms’ – flexibilisation of labour markets, reduction of collective bargaining rights, etc. – on reluctant countries.” and the year is only 2017, then what would it be like in the EU by the year, say, 2040?
      Those British voters knew exactly what was coming down the turnpike and decided to bail and accept a whole lot of present pain. It was not their fault that it turned out that their leadership turned out to be a load of stuff-ups. To reinforce the point, look at the pain and deaths that the American colonies had to endure to get out of the British Empire. Before 1777 that would not have seemed to be the logical thing to do.

  5. George Phillies

    Does this direction become a hazard to the United States?

    Mr. Putin appears to have an answer, but perhaps does not have ready yet the next step, namely the needed set of trained personnel, trays, software, and printed pieces of paper, so that one way or another a country that wants to jettison the Euro can convert its ATMs very quickly to do so. Being set up to print very large stocks of Euros from the country that is leaving also comes to mind. Readers will recognize other steps.

    Unlike some years ago, fast air access from Russia to southern European countries by overflying Mr Putin’s friend Turkey is now probably available.

  6. Norm

    A good summary of a situation that is too complex to be neatly summarized – so many political, historical, religious, cultural, etc. issues come into play not only for each nation involved but also on an individual level for hundreds of millions of people. My most immediate reaction to these suggestions that a militarily capable fourth reich may be emerging is that so many people in Europe will see it being necessitated by the growing chaos in the Middle East and in Africa.

    1. visitor

      In other words, Germany already effectively controls the armies of four countries. And the initiative, Foreign Policy notes, ‘is likely to grow’. This is not surprising: if Germany (‘the EU’) wants to become truly autonomous from the US, it needs to acquire military sovereignty, which it currently lacks.

      The Bundeswehr has been in a sorry state of disrepair for years, which has not improved despite policy changes regarding the military.

      And I seriously doubt that Germany really “controls” the armies of four countries.

      The fact is that so far Germany’s military strategy was conceived only within the NATO framework — where it could rely upon the heavy-lifting of the USA logistical train, the ground experience and battle-readiness of the French and the British, and the availability of the navies from Spain and Italy. Germany has neither the equipment, nor the personnel, nor the experience to take the lead of a EU military, and other countries will probably strenuously oppose such endeavours which would rob them from their last symbolic and practical vestiges of sovereignty.

      On the other hand, as the article explains, Germany is well on its way to assert its complete dominion over the economic and institutional arrangements in the EU.

    2. Mark P.

      so many people in Europe will see it being necessitated by the growing chaos in the Middle East and in Africa.


      1. JerseyJeffersonian

        Ah, yes, a crisis greatly exacerbated by taking down Libya, a country which had served as a bulwark against much of the tide of migration into Southern Europe from Sub-Saharan Africa, as well as an enemy to Wahabbi/Salafist terror.

        Not to mention the EU support for the dismemberment of Syria that launched its own tidal wave of migration into Europe, whilst Syria was also an enemy of Wahabbi/Salafist terror.

        In light of that, one must ask, in whose interest were these actions undertaken, and at whose behest? Well?

        Certainly not those of the inhabitants of the constituent “nations” of the EU (ironic quotation marks fully intended). And now Muti Merkel and the authoritarian scolds of Brussels are trying to force a quota of these migrants upon all of the “nations” – or should we say, the administrative zones – of the EU. Orban, Le Pen, the AfD, and ilk are not stupid, you know. Europeans, at least those of you who still possess a quantum of self-respect, and who honor your histories and cultures, gather your courage and tell Muti and the Commissars of Brussels that the game is over before they can inflict yet more damage. But – perhaps – you are already too comfortably numb to remember why and how to do this? Well, then, into the veal pen with you.

        1. Darn

          Prevention of refugees is much better than cure, of course. But as for sharing them out, that seems sensible to me, since they have legal rights to come, but no one country can take them all, so the burden should be shared. Especially due to Schengen. The UK only took in a token number of Syrians, which is hardly fair on everyone else.

          1. The Rev Kev

            So does that mean that I can take in a dozen refugees into my own home and then turn around and demand that you take some of them into your home as I have too many? Who made Merkel the boss of Europe? And Shengen only applies to within the EU so inviting in a million or so unidentified refugees and then claiming that they fall under the Shengen protocols as they were now in Europe was a bit disingenuous on Merkel’s part.

        2. Mark

          Germany, Russia and China were the only countries who abstained during the vote on the Libya resolution and no German forces took part in its destruction by NATO. Neither are there any reports that Germany supplied the Rebels in Syria. They officially supplied weapons to the Syrian Kurds to fight the Rebels (or Daesh to be specific) and the only German participation in the fighting are surveillance and reconnaissance flights. I don’t think there is a valid argument in blaming Germany or Dr. Merkel for these conflicts and the fallout. Probably the most significant contribution are the (massive) foreign bases Germany has allowed to be used for the wars.

  7. Colonel Smithers

    Many thanks, Yves.

    Further to “France’s corporate offensive in Italy”, one-sided as France took recent exception to the take over of one its shipbuilders by an Italian rival, I would argue that it’s an offensive by the EU’s 1%, a strategy of immiseration facilitated by the likes of Guy Verhofstadt as per Sofina is well-connected with the French establishment by way of Eurazeo and the Italian establishment by way of Banca Leonardo.

    I worked in and with “Brussels” for many years and can say that many, if not most, of the personnel involved with EU institutions are neo-liberals, neo-cons and deluded with the fantasy of an EU imperium, Greece to America’s Rome. It suits them and their cheerleaders, including in Blighty, to pretend that this is due to the malign influence of Albion perfide or Anglo-Saxons. One should not expect a change of tack after Brexit. The “racaille” are profit(eer)ing too much and are able to get away with it under the cover of more Europe.

    1. Christopher Dale Rogers


      As far as EMU is concerned, monetarist economic thinking has been predominant in much of the Europhiles output on monetary union since the 70s, that is, prior to the UK joining the Community. Bill Mitchell has written concisely on this over the past week & is quite scathing of Mitterrand and Delors for their embrace of what we now term ‘neoliberalism’, combine this with a desire for an actual military arm & one really does worry about the direction of the EU, with or without the UK.

      Further, and within the lecture presented by Sir Ivan Rogers last week concerning Cameron & Brexit, the fact remains both the UK Elite & Euro Elite were keen on pushing TTIP, this despite the fact many believe it was the UK pushing neoliberalism on to Europe.

      I think I concur with Mitchell that a Federal EU State is a big no no for Germany, based on the fact fiscal transfers would be out of the German coffers, and this fact is amplified by the exit of the UK, which was a big net EU contributor. The rumour mill has it that Jans Weidmann will be the next ECB Head, which means we can expect more, not less austerity imposed as the EU elite push further EMU, which, is certainly not in the interests of the average Joe across the Euro member states.

      Anyhow, check Bill Mitchell out, so decent material and nice to see people standing up for the Nation State, rather than supranational entities and corporations.

  8. Left in Wisconsin

    I found the first about 1/3 of this post informative. But then the author gets to the main thesis:

    The process underway can only be understood through the lens of the geopolitical-economic tensions and conflicts between leading capitalist states and regional blocs, and the conflicting interests between the different financial/industrial capital fractions located in those states, which have always characterised the European economy. In particular, it means looking at Germany’s historic struggle for economic hegemony over the European continent.

    This suggests that the national battles in Europe are battles between different national “capital fractions,” in particular German capital with its everlasting desire for economic hegemony over Europe against (presumably) other European national capitals that are opposed to Germany.

    That does not strike me as an accurate description of the current status of Europe or the EU, and nothing in the rest of the piece suggests that this is a (the most?) useful lens for interpreting events. The author even admits that elites from smaller Euro countries are happy in the role of compradors to Germany’s economically dominant capitalists and that “European elites” are united in their anti-democratic tendencies. Even the German election results show this thesis to be dubious – if “Germany” is well on its way to it’s long-cherished goal of European economic hegemony, why on earth would voters be tired of Merkel? They should make her Kaiser!

    1. nonsense factory

      If Germany is trying to build a mini-imperial system straddling all of Europe, then it would seek willing ‘elites’ in the small European countries to give a slice of pie to in exchange for their cooperation with that agenda. This is standard (neo)colonial policy today, which is best understood as the neocon/neoliberal approach the United States has taken to world domination – aka bad cop/good cop. “Accept our offer of a carpet of gold or we’ll deliver a carpet of bombs”, is another version of that offer. The one that can’t be refused?

      Jump down a few paragraphs from your quote to this:

      This is because public debt in the eurozone is used as a political tool – a disciplining tool – to get governments to implement socially harmful policies (and to get citizens to accept these policies by portraying them as inevitable), which explains why Germany continues to refuse to seriously consider any form of debt relief for Greece, despite the various commitments and promises to that end made in recent years: debt is the chain that keeps Greece (and other member states) from straying ‘off course’.

      That would be the neoliberal mechanism of control; notice here how debts assumed by small nations are not like debts assumed by the controlling powers, either. Rather like student loan holders vs. central banks – students can’t print money to pay off their debts, that’s the difference.

      As far as Germany’s voters, well, the reality of Empire is that trickle-down is a myth. Empires always deliver the tribute from foreign holdings to a small circle of politically connected elites – British lords, French aristocrats, Wall Street billionaires, Third World tin-pot dictators, etc. The general public always suffers as a result; you have to fund the foreign military adventures over the domestic infrastructure, health care and education needs. Hence Empires always try to limit and undermine democratic rule; the German voters probably see this as well.

      I’d suggest Hannah Arendt’s The Origins of Totalitarianism as a good read (or listen) for a discussion of how this could play out.

      1. Left in Wisconsin

        Right. But where are the competing national capital fractions opposing German capital? The author claims that the conflict between different national capitals is the appropriate lens for understanding Europe. Is Greek capital or Italian or Spanish or Portuguese capital battling against German capital? I don’t see it.

      2. icancho

        “… the reality of Empire is that trickle-down is a myth. Empires always deliver the tribute from foreign holdings to a small circle of politically connected elites – British lords, French aristocrats, Wall Street billionaires, Third World tin-pot dictators, etc. The general public always suffers as a result; you have to fund the foreign military adventures over the domestic infrastructure, health care and education needs.”

        Right. And all nicely described and analyzed in J. A. Hobson’s 1902 title Imperialism, looking at the British empire’s economic relations with its empire. After laying out the realities of trade between Britain and its colonies, he remarks:

        “Seeing that the Imperialism of the last six decades is clearly condemned as a business policy, in that at enormous expense it has procured a small, bad, unsafe increase of markets, and has jeopardised the the entire wealth of the nation in rousing the strong resentment of other nations, we may ask, “How is the British nation induced to embark upon such unsound business?” The only possible answer is that the business interests of the nation as a whole are subordinated to those of certain sectional interests that usurp control of the national resources and use them for their private gain.”

    2. Ames Gilbert

      Well, the elites are happy, but no so much the workers, either in the weaker countries or Germany. They are all getting diddled. They know that austerity doesn’t work; and even in the case of Germany, they know that their wages don’t keep up, a deliberate policy to ensure that they remain ‘competitive’. As in the UK and the USA, they may not be au fait with neoliberal economic theory but they know something is very wrong. Many no longer accept the platitudes of their betters, and jam tomorrow, but never jam today. They certainly know the regular politicians and parties don’t represent them and don’t fight for their interests. And, as of this moment in time, many vote against those politicians and parties.

  9. JEHR

    So, if it is true in economics that stability creates instability, then the creation of a stable Europe will undo itself in the manner that this article appears to be saying. In order to avoid conflict, the European Union has created a trading zone that has a great deal of inequality in it–not just in trade but inequality in the financial system that will continue to grow as corporations merge and become ever larger and as banks become ever more monolithic. Perhaps, national sovereignty will succumb to financial hegemony rather than becoming the victims of German hegemony.

  10. Summer

    And what would have been the plans for Britain?
    Big omission in the article. That was a damned if they do, damned if they don’t option.

    Isn’t a lot of the EU’s bill for Britain about making sure they pay for EU officials pensions?
    While everywhere else it is austerity for Eurozone and EU countries’ pensioners…

  11. James McFadden

    Although I found this article helpful in summarizing many of the changes in EU politics, the author is incorrect in his premise that the German government is at the root of the anti-democratic, neoliberal EU movement. The author ignores the dominant role that the interconnected multinational corporations (–the-capitalist-network-that-runs-the-world/) play in running the global political economy.

    69 of the top 100 economies are now corporations ( National politics have become subservient to the interests of the financial economy which can move money quickly and destroy a state’s economy when political decisions do not follow the neoliberal script of austerity. The author’s premise that “Germany … needs to seize control of the most coveted institution of them all – the ECB –, which hitherto has never been under direct German control” is backwards. It is the ECB that has had control of the German political leaders for years. Whether “Merkel now has her eyes on the ECB’s presidency” or not does not matter. She is merely a cog in the corporate machine – easily replaced if she fails to follow the neoliberal agenda of austerity.

    Of course we must recognize that austerity is only imposed as an attempt to inflate the debt bubble by squeezing those least capable of paying, those considered disposable in the sociopathic and mechanistic corporate hive mind. The “automatic stabilizing mechanisms” that “put the economy on ‘autopilot’, thus removing any element of democratic discussion and/or decision-making” are really just manifestations of the emergent behavior that this corporate super-organism expresses and imposes on the global economy. (

    This corporate super-entity reminds me of “Omnius Prime” in the Dune universe – a computer with nearly total sociopathic control over humanity. The corporate super-entity, whose AI program’s only concern is maximizing short term profits by inflating securities and equities, will eat the Earth if we allow it to continue – digesting and purging humans which have been commodified like everything else.

    This total corporatization is at the root of both existential threats to humanity – nuclear war and climate change. The risk of nuclear war (primarily from some mistake or miscalculation) results from the military-industrial complex’s imperial program of globalization to further multinational corporate profits and control, and climate change is a cancer driven by corporate resource exploitation that will surely kill humanity if we don’t cut out the corporate tumors and stop smoking that oil.

    I’m beginning to think that the only way to save humanity, to save the planet, will be a “Butlerian Jihad” to rid us of the existential threat that corporations represent. I wonder how many people will have to be consumed by this corporate monster before we rise up to kill it. There will be a cost to eliminating corporations, to ending the limited liability of the owners, but that cost will be well worth the price of saving humanity, civilization, and our ecosystem. “There is an evil which ought to be guarded against in the indefinite accumulation of property from the capacity of holding it in perpetuity by … corporations. The power of all corporations ought to be limited in this respect. The growing wealth acquired by them never fails to be a source of abuses.” James Madison

    1. Yves Smith Post author

      Argument by assertion doesn’t work here. There is no evidence whatsoever that the ECB has influence over German leaders. More generally, German politics are dominated by industrial capital, particularly its automakers, not financial capital. And in fact the Bundesbank has disproportionate influence over the ECB. And Germany has repeatedly checked measures that would provide more support to the banking system and lead to more Eurozone integration to preserve its advantaged position.

      In addition, the EU is perfectly willing to take on global corporations, contrary to your claims. Did you miss the massive anti-trust fine it imposed on Microsoft, and the fines it has imposed on Google? The EU competition ruling on Google will force Google to change how it does business in a fundamental manner, and the fines (up to 10% of global revenues for a violation in a single line of business) are high enough to bring Google to heel. The EU also is requiring Apple to pay a ginormous tax bill for its special tax avoidance scheme in Ireland.

      If you are going to comment on European politics, you need to know the terrain. You don’t, and worse you say things that mislead readers.

      1. James McFadden

        Yves, I really appreciate naked capitalism, but I will respectfully disagree with you here.

        Everything I have read (or heard from colleagues – albeit nearly all were scientists) about the EU suggests it is very similar to the US – that nearly all of their industry, including German industry, has been financialized and that top level corporate decisions are no longer based so much on considerations surrounding production as they are on pleasing the securitization markets. Those perceptions determine stock price and capitalization – the costs of borrowing, etc. For example, Volkswagen, a public company traded on multiple exchanges, must be constantly concerned about stock price and securitization issues. ( Finance is king. And much like the US, where there is a revolving door between Wall Street and government (with Goldman Sachs being the security guard at the door), there appears to be a revolving door between the Troika and highest levels of state government (for example Lagarde and the IMF) – a form of capture – with banks again playing central role. I believe neoliberalism and monetarism are the ideological manifestations of the sociopathic, mechanistic corporate hive mind that is guiding most economic and political decisions in the EU — and world in general. This hive mind is incapable of solving the debt problems of Greece, Italy and Portugal. German politicians are incorporated into this super-entity. They are no longer just concerned with pleasing their German constituents who only have a limited set of choices among preselected elites (although perhaps they have more choices than we have here with our duopoly). They are more concerned with Troika decisions that affect Deutsche Bank, or any of their other multi-national ‘German’ corporations, which can impact jobs and public satisfaction with the economy. Since the Troika wields so much power over European economic issues, the politicians must be subservient to them – and those Troika interests are primarily financial interests – banking and security market interests. Capture happens because politicians serve both state and global interests – and because monetarist ideological structures determine who rises in the polis. The Varoukfakis article posted by RicRadio seems to support my perceptions of this EU political economy. Where we differ is primarily on my hypothesis about emergent behavior. Varoufakis seems to just be confused by Troika’s illogical behavior offering no real interpretation of why they are locked into a course towards disaster. The basis of my hypothesis can be found in the corporate structure outlined by C. Wright Mills in ‘The Power Elite’ — how one is indoctrinated or tossed aside during one’s rise in the corporate structure. However there are globalization and monetarist changes since that was written which must be considered, along with all the new technology and securitization/financialization of the last few decades. But these changes just add to the structure of the emergent behavior.

        As regards your statement that “Bundesbank has disproportionate influence over the ECB” – I’m not sure I know what you mean. If your mean Bundesbank is full of monetarists and so is the ECB, then I would agree. But if you are saying that policy decisions of the ECB are skewed to favor Germany even when it clashes with monetarist policy, then I’m not so sure I would agree. I think the Troika is concerned with globalization which extends beyond Germany. Monetarist propaganda like this Bloomberg article ( suggests that Bundesbank is an independent entity. But I don’t buy that. All of these bankers are monetarists following the same ideology, and their primary reason for a stable currency is to increase trade and globalization to benefit a financial elite (who no longer play a role in industry decisions – and only play a role in securitization decisions). The main exception to the stable-currency monetarist goal seem to be that it doesn’t extend to the third world where the financial titans shift money rapidly to destroy a country’s currency and economy – typically done if third world countries don’t follow the dictates of the global financial institutions (IMF, World Bank, WTO) by liberalizing trade and implementing austerity. But I digress – back to Bundesbank and the Bloomberg article. After all the hype in the article including “ECB was deliberately infused with the spirit, and some of the staff, of the German central bank when it was created 19 years ago” the article closes with an admission that the tables have turned – “The rise of the ECB has meant a down-scaling for its German forerunner. The Bundesbank …” This suggests to me that Bundesbank is subservient.

        Anyway, perhaps I am mistaken in my analysis – I can only read/analyze so much. I don’t get defensive when proven wrong – and I would appreciate any and all to point out my mistakes in logic. I’m here to learn and exchange information – the reason I read naked capitalism.

        1. Yves Smith Post author

          I don’t mean to sound tart, but your anecdotes from scientists, who will be well below the senior level in any organization, are a not a great source of intelligence, and their view appears to be unduly narrow. Scientists have become increasingly subject in academia to having to pay their way via raising their own grant funding.

          I must note you fail to provide any evidence of a revolving door between finance and government in Germany, because it is so infrequent that it effectively does not happen. Unlike in the US, there is considerable skepticism towards capitalism and businessmen in Europe (this from people doing business here and there, selling regulatory-related services; the Europeans he’s met in official and senior positions assume some if not most private sector types will be crooked and need to be watched, and that it is particularly easy for people in finance to con customers and the public). And the link you provided on the Bundesbank, although trying to make a different point, confirms what I said: the Bundesbank wields disproportionate force over the ECB. You appear to be objecting to the Bundesbank thinking like a typical central bank, as in being dominated by monetary economists. So what?

          As to your Volkswagen factoid, that also proves nothing. Germany’s strength, and it’s government’s legitimacy in the eyes of the public, comes from its status as an export powerhouse. Never mind that that preference going to wreck the Eurozone long term. Germany’s exports are dominated by its Mittlestand companies, not its relatively few public companies. Over 2/3 of its exports are from Mittelstand companies. Mittelstand companies are the pride of Germany, and are seen as innovative and fleet-footed.

          They also reject financialization. From Wikipedia:

          What does define the Mittelstand, is a much broader set of values and more elastic definitions.[10] Business historians[11][12] define various traits associated with Mittelstand firms, such as:

          Family ownership or family-like corporate culture
          Generational continuity
          Long-term focus
          Emotional attachment
          Investment into the workforce
          Lean hierarchies
          Customer focus
          Social responsibility
          Strong regional ties

          The latest English publication on Mittelstand firms by Prof. Bernd Venohr, Prof. Jeffrey Fear and Dr. Alessa Witt highlights that: “These companies are predominantly run by classic “owner-entrepreneurial families” (Unternehmerfamilien) seeking to sustain the business by instituting a core ideology of longevity, conservative long-term financing, and operating practices.”[8] The Mittelstand acts as a counterpoint to a singular focus on shareholder value and dispersed investor-orientated shareholding.

          In addition, Germany has been taking positions within the EU and Eurozone that are opposed to financialization and increasing the role of financial capital. Economists have argued that Germany is acting this way to preserve its privileged position in the Eurozone. In other words, Germany from a matter of policy is giving national sovereignity priority over economic integration. That is contrary to what financiers want.

          More specifically, Germany has staunchly opposed measures that would achieve more Eurozone integration via financial means, such as Eurobonds. Germany also took steps that effectively undermined integrated European banking regulation in the BBRD, as well as an integrated deposit guarantee scheme. Banks would have greatly preferred both measures.

          As to your other claims, the IMF is a US-dominated institution, despite recently (and controversially) having its head be European. Moreover, Christine Lagarde was never a banker. She was the chairman of a law firm, Baker McKenzie, which is not even remotely a player in banking or financial regulations. Lagarde was an antitrust and labor lawyer. She served in several positions in the French government, head of the commerce and industry department, then agriculture, then finance. So she has no private sector financial sector experience or ties whatsoever.

          In addition, which is too long for discussion here, but I have covered at length in posts on the IMF, the IMF was never supposed to be involved in helping rescue advanced economies. And Lagarde was and is in a very awkward position given the sheer size of the exposure to Greece. She is under pressure from the developing economies which have half the board votes to stick to the IMF’s role of “helping” developing economies hit by currency crises. She has been trying to extricate the IMF from Greece with only partial success.

          And the ECB did not call the shots with respect to Greece. The national governments, via the Eurogroup, did. The ECB had violated its own rules in keeping the Greek banks on life support. The ECB was clearly eager to end that, yet continued to provide funding until it got the go-ahead from elected political leaders to withdraw support, which had the effect of shutting down Greece’s banking system.

          Having said all of that does not amount to praising Germany. Germany wants contradictory things, which is to run sustained trade surpluses yet not finance its trade partners. Forcing austerity on its trade partners will destroy them and the Eurozone. But to say Germany is financialized or finance dominated is wrongheaded. It is pursuing a classic trade-dominated mercantilist strategy to the point of destructiveness.

  12. John Zelnicker

    Jeebus! I had no idea that Germany had extended it’s claws so far into the affairs of other countries as to be integrating their army units.

    I suppose it’s a much better strategy than attacking those armies and risking people getting killed. :-/

    But, seriously, Germany has moved far beyond it’s mercantilist advantages and subjugation of Greece and other periphery nations. It has become beyond obvious to me that they learned from their experience in WWII and decided that economic hegemony was the way to go to achieve de facto political hegemony. I think the Fourth Reich is fitting.

  13. David Swan

    Thank you for having the courage to put those two words together so chillingly: “Fourth Reich”. You are not an alarmist to do so – you are right on the money. This has indeed been a deliberate decades-long campaign to install German hegemony (no “accident”), and the project is well along its way.

    From here we can soberly project a future in which Europe *does* finally institute a fiscal compact – wholly on Germany’s terms. Is it too outrageous to suggest that there will one day be a new Holy Roman Emperor to wear the crown of Charlemagne? And would it be too forward to make guesses as to the nationality of said emperor?

    History is not over. Not by a long shot.

  14. Larry

    Then we see power blocks aligning, the US (and it’s proxies), the EU under Germany, Russia, and China. Clearly we are sitting on a powder keg that is the disintegrating neo-liberal world order, what will serve as the spark that lights the fuse? Trump and North Korea? War for fun and profit in the Middle East?

  15. Patrick Donnelly

    Ein Volk! Solidarity can extend to anyone.

    Germany was mislead into WWII. It lost massive technological advances to those who had rearmed Germany. But CCCP was able to show to Germans, that Aryan socialism was not a threat to Germans or any except those who value power more than humanity.

    Americans are so generally ignorant of history, it has to be considered that they are misled by their own institutions. Having been stripped of their own cultures, by “the hidden hand”, thay may get a rude awakening, soon.

  16. makedoanmend

    My reaction to this article (many of the points I wouldn’t disagree with, such as the EU being a capitalist project) was – ‘so what?’.

    Of course the EU is a capitalist project and like all such projects (including Socialist projects that project an ideal upon messy reality) it is full of contradictions. But it should be noted that capitalists projects have been very adept at changing with circumstances because, above all else, concentrated capital rests in very few hands and such small controlling numbers aligned by their desire to save their capital often have the ability to change direction, tempo or temporarily alter their appearances very quickly. Often, not always.

    And as the economic neo-liberal UK leaves the economic neo-liberal EU, there will be power shift within the EU. It would seem Germany, allied with France, will continue to have the most influence, but they require a host of neo-liberal governments (20+ others) in order to foist their will upon all Europeans. They have achieved this to date because the populations of the West have voted for economic neo-liberal parties, including the UK and the USA (arguably the idealist home countries of economic neo-liberalism).

    As for the military balance of power in the world…please… the EU is a pip-squeek. Bascially it is still a vassal of the USA. Last time I looked the USA had military bases in Germany, not the other way about.

    The world is dominated by one super power and a few very wary competing power blocs. At one time I would have suggested that the EU might become a competing power to the USA. That time has past (at least for the foreseeable future) as the USA asserted its dominance in the Middle East (mightn’t be going swimmingly, but the USA could virtually act with impunity) and left a hapless Europe to deal with the ongoing refuge problems and the economic disruptions.

    Given the timing of the Brexit negotiation debacle this week, it seems some people are trying to project the UK’s abysmal negotiating tactics as some sort of ‘meta-supra-[hidden-agenda]-genius’ ploy to wrest the UK from those perfidious, foreign European types. But, of course, the current UK regime is completely economic neo-liberal and ideologically “aligned” with the EU. When Jeremy Corbyn becomes Prime Minister (happy days) he’ll, at best, only begin to lay the foundation for an alternative to the current malign syndrome. It will take decades to upright the injustices and contradictions of economic neo-liberalism.

    Meanwhile the economic neo-liberal UK is leaving the economic neo-liberal EU and thus weakening the EU both economically and militarily – significantly so. In one fell swoop the EU become weaker than it was a a few years ago. This is hardly the juggernaut of Putinesque grotesqueness that the author might convey to others.

    Meanwhile, tiny little Ireland, heavily reliant upon both USA and EU business interests, will probably go on electing economic neo-liberal parties until the absurdities just become too much to bear. The current Brexit negotiation fiasco (especially the attitude of Tory politicians in their contacts with the Irish) made it a little easier for the economic Irish neo-liberal parties to run with an Eurocentric economic policy.

    If you think life is hard as a small economy in a ruthless ocean of economic neo-liberal parasites, vultures, sharks (and wee wiggly things that glow in the dark) then spare a thought for those hapless Socialists watching the horrors unfold.

  17. Eustache De Saint Pierre

    The problem is that as was described in the article, for the EU, especially that which is of the EZ, even if a country elects an alternative to TINA, as with Greece they lack the necessary tools to actually change anything & debt is used as a disciplining measure in order to maintain business as usual. This also has the effect of discrediting what is in effect a castrated administration, leading to the likely return of those the Neolibs can do business with. One of the reasons that I have nothing but contempt for the ” reform from within ” line from those who bask in the glory of a progressive EU that no longer exists.

    Perhaps it is not so premeditated as the author suggests, but even so, the pattern in which the largest & strongest partner gradually dominates the weaker members within it’s influence is historically well documented. It reminds me of Athens gradual takeover of the Greek world in a time when Persian power was on the wane.

    The only difference now it seems to me is that the tools of warfare are in this case economic, which is much easier on the eye & very much less dramatic. After all if the 1990’s deaths in Russia from Neoliberal stormtroopers had been from the point of a gun, imagine the reaction, but no, thousands of deaths as a result of austerity do not make the headlines & the statistics for death rates etc take years to appear. One might get a brief mention in the media if you blow your brains out in Syntagma square, but otherwise there is no need for tanks & the people that die from despair or whatever are it seems largely beneath the notice of the comfortable urban Liberals.

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