This articles was published on the Guardian Comment website
Two votes of no confidence
10 May 2010
The political class in Britain and Germany have finally woken up to the fact that the public no longer trusts them
German politics faces a new nightmare as voters in Germany's biggest land, North Rhine Westphalia, punished the ruling chancellor, Angela Merkel, but refused to give confidence to the opposition Social Democrats. With its 13 million inhabitants North Rhine Westphalia is as big as a middling EU member state. Now Merkel's Christian Democratic party has lost its majority as it got 34.5% of the vote, exactly the same percentage as the Social Democrats. The Social Democrats have to decide whether to form an uneasy coalition with the Greens, who increased their vote, and the leftist Die Linke, whose ultra views are unacceptable to most mainstream Social Democrats (a bit like Gordon Brown working with George Galloway).
The loss of CDU control in North Rhine Westphalia means that Merkel no longer has a majority in the German parliament which needs both its houses to agree laws. As in Britain, Germany has a parliament which no single party controls.
Like us, the German voters have no confidence in their political class. Neither first past the post nor PR seem able to deliver stable political governance in Europe's two leading states. The reasons can be found in the wider collapse of confidence in an economic system that delivers less and less social justice and demands more and more financial transfers from the individual to the state. Germany doggedly set about saving its industrial exporting base at the end of the 1990s under Gerhard Schröder. It did so by holding down the share of German wealth going into wages of car and other workers in the exporting sector of the economy. German export capitalism was revitalised, but German workers stopped voting for social democracy as their purchasing power was cut to boost profits and shares.
Now Gemany lectures the rest of the world on the virtues of its own model. But German wealth comes from the rest of Europe buying German goods while Germany refuses to import from its EU partners. In consequence, Germany needs the eurozone more than the eurozone needs Gemany. If Greece, followed by other countries, starts to default or devalue, then German banks and exporters take a huge hit.
Devaluation is a form of currency protectionism. If the eurozone disintegrates, barriers to trade will emerge overnight. German leaders understand this, as do policymakers in every EU capital including London. Britain may not be in the eurozone but our economy is intimately linked to the future prosperity and stability of the continent.
We need to export more and the market of 500 million customers an EasyJet or Eurostar journey's distance away is where we should focus. But it needs explaining to voters that Europe matters. Merkel faces an increasingly strident populist press that insisted German virtue was being sullied by feckless Mediterranean layabouts.
To be sure, the Greek government refused to accept the need for reform. But the EU is based on British notions of the supremacy of national sovereignty over extremely limited powers and authority for common European systems of regulation. The Greek crisis unfolded because Europe was too weak and unable to, yes, order Athens to clean up its fiscal base and make middle-class Greeks pay taxes.
Now, the price is being paid by the poor as benefits are cut and modest public service employees bear the brunt of the failure to control the greed of the Greek rich and the tax-dodging doctors, dentists, lawyers and other professionals. The massive intervention of EU governments with the European Central Bank intervening to support the eurozone is aimed at stopping the speculators, who now face losses on their selling of euros in recent weeks. This should be welcomed as a first step by democratic authorities to punish speculators in the way they best understand – by cutting their gains as they play in the casino of currency betting.
But it needs to be explained by politicians. Merkel failed to do this and pretended that Germany had no duty of care to the world region from which it gains its wealth. She was under pressure from a xenophobic press and by opposition politicians, including sadly, Social Democrats who were wallowed in their schadenfreude – pleasure in their opponents' pain.
British politics also prefers to hear, speak and see no Europe. If the Lib Dems enter into an alliance against nature with the deeply anti-European Conservatives, then Britain will be as isolated from the unfolding European crisis as Britain was after 1990. In that lost decade, Britain under John Major, who simply did not understand Europe, was a passive whining spectator on the fringes of the major developments in Europe, from the creation of the single currency to stopping the killing fields in the Balkans. Nick Clegg, Chris Huhne and Menzies Campbell are political leaders who do know and care about Europe. If they are swallowed up by the deeply anti-EU Conservative party then their voices will be lost and British politics will be the poorer.
So Britain and Germany face a politics in which voters do not trust their political leaders and political leaders, in turn, refuse to lift their game and tell the truth about the profound crisis we are traversing. The 20th century is over and its system of greed-based capitalism before which all bowed is now collapsing.
Equally, the late 20th-century state, which takes more and more of the wealth generated by individuals' work and hands it over to a bureaucracy that perpetuates its own interests, is now as much the problem as the solution. We need a new market economy and a new state. The political crisis in Britain and Germany will worsen. The speculators' attack on Europe has been halted, but not reversed.