Why German unification was a mistake

Thirty years after the inauguration of Helmut Kohl and 22 years after German reunification, the former chancellor is being celebrated as the father of German unity. But the truth is that, by hastily joining the GDR to the Federal Republic, he planted the seeds of the euro crisis, argues Wolgang Münchau.

ΠΗΓΗ: SPIEGEL 3/10/2012

by Wolfgang Münchau

Once again he was sitting there in the hall of the CDU / CSU parliamentary group in the Bundestag – one of the last great Europeans among the Christian Democrats, surrounded by an army of euro-sceptics who during his visit to the Reichstag building gave him merely polite applause. Helmut Kohl has reason to fear for his dream of European unification.

Kohl, never at a loss for a metaphor, always used to talk of the two sides of the same coin – German unity, and European unity. That was certainly a handy formula, and he may even have believed in it himself. But time has proved it wrong. German unification is not the flip side of European unity, but its opposite. German reunification is not just one of the root causes of the euro crisis, it is also one of the causes of our inability to master the crisis. Precisely here lies the real tragedy of Helmut Kohl: with his greatest political trick (German reunification), he sowed the seed for the destruction of his greatest political dream (European unity).

The hasty reunification cost almost two trillion euros in transfer payments, and it was the greatest example of economic mismanagement in the history of the world. It was a record, which is only now about to be smashed by the euro-disaster. One can hardly be surprised that the (formerly West) Germans, who had to put up with the transfer payments to East Germany (and must still put up with them) want no further transfer union in Europe.

A leadership role Germany never wanted

I am firmly convinced that the old Federal Republic of West Germany would have handled the euro crisis better. We would now have the fiscal and banking Union, and the Greek debt would be written off. For the old Federal Republic, the European integration was the ultima ratio, the last resort, of all politics. The crisis would have been grasped as a chance to reform the institutions of the EU.

But instead of European unity, national unity came first, and the change of the capital city to Berlin brought the West German politicians into a political culture that is closer to Moscow than to Brussels, Paris and London. I still recall a conversation with a leading CDU member a few years ago, who responded to a question from me on economic policy coordination in the eurozone with the answer: ‘Germany is not coordinating at the euro-level, but only with the G20’ – the group of the top 20 industrialised nations. Germany no longer sees itself as part of the EU, but as an independent mid-ranking power on par with the Americans, Russians and Chinese, without those small European states butting in.

How could it have come to this change in course? With German unification, a key element of the European dynamic, which was based on a balance of the five largest member states – West Germany, France, Britain, Italy and Spain – was broken. It is no coincidence that with German unification Britain’s interest in the EU disappeared.  And with the steady withdrawal of the British, the power imbalance grew even greater.

Germany now accounts for more than a quarter of the economy of the entire eurozone, but the country is finding it tough to handle a leadership role in Europe that it never wanted. The old Federal Republic, an equal partner among the five, would be behaving today like the Netherlands. Critical, but constructive.

Germany entered euro at an inflated exchange rate

I myself, I must admit, was among those who believed for a long time in Kohl's two-sides-of-the-same-coin metaphor. At the start of the early nineties it was hard to imagine that Germany would ever diverge from the pro-European consensus. This happened, in part, because of East German politicians like Angela Merkel, who had no personal relationship with the EU and felt strangers to the idea of European integration.

The alienation, though, cannot be explained solely by the ‘Eastern’ effect. Even in the West, priorities were changing.  One reason is economic. Due to the costs of reunification, Germany entered the euro at an inflated exchange rate. The result was that for a whole decade German economic policies concentrated on boosting Germany’s own competitiveness against third parties instead of strengthening the economic performance of the eurozone as a whole. And that was one of the major causes of the crisis that would come later.

German and European unification can therefore largely not be reconciled, because they have both turned out badly economically. I believe that future historians will take a critical view of German unification and Kohl's merits, which is the view today.