Germany and Europe: Towards a New Growth Path?

June 19, 2012
Mercator Project Centre Berlin, Germany

“German leaders will have to choose between a shipwreck and a change in course. I do not know which Germany will choose. I do not know whether its leaders know. But on that choice hangs the fate of Europe.“

This is how Martin Wolf of the Financial Times describes the drama unfolding in Europe – a drama that has gained a new twist with France electing president Hollande.

Germany’s perception of its role in Europe hangs in the balance. On one hand, a rigid economic orthodoxy supports a simple view of how the national interest of Germany and the collective interest of Europe fit together: just turn the ECB into a scaled-up version of the old Bundesbank, restrict the role of government to ensure that markets are competitive and that public goods are provided with balanced budgets, and everything will be all right. If this means social hardship for some countries, perhaps even dropping out of the Eurozone, that’s the price they have to pay for past violations of allegedly well-established economic laws.

On the other hand, however, in German political life there is a different possibility to define German and European interests. It is the possibility to see Germany as a pioneer in overcoming unsustainable ways of life. This includes a deep desire to establish and maintain peace – a core driver of European integration. And it includes the desire to develop and maintain an environmentally friendly way of living. The decision to phase out nuclear energy while drastically reducing greenhouse gas emissions is an important outcome of this desire. It can hardly be implemented without a Europe-wide switch to a new growth path. The old economic orthodoxy will not deliver that. New economic thinking is required, in particular to distinguish between marginal changes within the current basin of attraction of the European economy and inframarginal changes that lead to a basin of attraction with less dire prospects.

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