Jacob Christensen

Over the years, I have voted on the European Monetary Union twice – or even three times, depending on how you count: The 1992 Maastricht referendum in Denmark, the 2003 EMU referendum in Sweden – and technically speaking the 1993 Danish referendum on the Edinburgh agreement also included the issue of Denmark’s relation to the future monetary union. Among us, I will admit to having voted “yes” both (all three) times even if I had become more critical of the project over the years.

The EMU raises a number of political and economic issues. Basically, there were two arguments for the monetary union: First, it should facilitate trade in the EU; second, it should help create a common identity. The question here is if the EMU and the single currency were and are necessary conditions for reaching either goal – even if we should also be critical of developments on the financial markets, they have come up with a number of instruments designed to lower the costs of currency fluctuations during the past thirty years and as for bank notes as a means of creating identity, well, yes and no. The Deutschmark-nationalism is a well-known fact.

Back in the early 1990s, I found the technicalities of the entire adventure hard to grasp even if I actually attended a lecture where Niels Thygesen explained the process and the institutional set-up. Maybe I was theoretically challenged, maybe Thygesen wasn’t a master of didactics or maybe there was some kind of flaw in the political set-up. Still, all things considered I thought the Maastricht package was better than letting what was then the EC go sideways.

In 2003, I had some more specific issues with the EMU. In 2000 the Danish Economic Council had more or less destroyed the basis of the “yes”-campaign by pointing out that joining the EMU had no economic benefits for Denmark – an important part of the reason was that the Danish currency had been pegged to the D-Mark and later the proto-Euro since 1982 – and that membership was a purely political question. We would have expected Danish politicians to receive this conclusion enthusiastically but the problem is that Danish EU-politics in general has relied on de-politicising issues related to Europe. Similarly, monetary policy has been depoliticised in most Western countries since the 1980s by handing over competences to the national reserve banks.

The situation in Sweden was – and is – slightly different, as the Swedish currency has been floating since the mid-1990s so technically Sweden has some degrees of freedom with regard to monetary policy which Denmark do not have.

In any case voters are a curious bunch: They do not like “politics” but on the other hand they do not like the idea of not having any actual influence on central political issues – such as economic growth and employment.

And this was one major problem with the EMU: It is copied on the (West-)German post-war tradition of fiscal and monetary policy which basically states that employment and economic growth are subordinate to price stability, so if you adopt the EMU, you also make a political choice which not everybody would agree in.

Another problem is that EMU assumes that economic development in all member countries follows the same economic cycle. This raises the question what happens when some countries are going through an economic slump while others are in a boom. The EMU does not have the instruments to deal with this situation, except banning countries with weak growth from boosting their economies. There are more problems, but this will illustrate the political-economic-institutional corner the EMU countries risked painting themselves into.

Finally there was the question about governance in the EMU. Having guidelines is all very well, but problems arise when they are not followed. A more thorough examination of Greece’s political and economic institutions would probably have kept the country out of the EMU to the benefit of both Greece and the EMU. Similarly, France and Germany forced the EMU to bend its rules with regard to deficits and debt in the early 2000s.

Add a major global economic slump and the EMU vehicle is very likely to hit the wall in a violent matter. We are now in a situation where four or five EMU countries are facing a choice between a decade of severe austerity and slow (if any) growth on the one hand or leaving the EMU suffering the penalties of the financial markets. This is a recipe for severe social disorder: 2012 may not be 1932 but politicians and bureaucrats would still do well to remember the name “Heinrich Brüning”, the German chancellor whose technocratic austerity policies led Germany to the brink of civil war.

At the same time, politicians are slowly recognising that the existing political-economic institutions are inadequate and have to be amended. But, first, passing institutional reforms in the multi-level EU system is notoriously tricky, and, second, the process has already revealed the cracks in the relationships between EU countries. It is not outlandish to consider the possibility of the UK leaving the EU or the Eurozone breaking up into two or more parts.

So to conclude: What the EU needs now is not another patchwork agreement (even if the Union has to muddle through in the short and medium term) but a reassessment of the raison d’être of a political and monetary union and the adequacy of its institutions.

Today’s Berlingske has another of those articles (not published on the web) telling us that “Germans have a natural fear of inflation” due to the hyperinflation of the early 1920s.

This may be but isn’t it strange that the deflationary austerity policies of Heinrich Brüning which were an important element in the developments leading to the collapse of the Weimar Republic and democratic order are completely forgotten in the narrative?

(This isn’t an original thought of mine: Some economist – Krugman? deLong? – posted similar ideas some weeks ago)

Last week’s silence was due to a vacation which I spent visiting Berlin. Among the sights was this probably unintentionally but still highly symbolic bear commemorating a meeting of EU Finance Ministers in 2007.

PS: All my public photos from the trip are here. And here is a batch from the last time I visited Berlin – in 2004.

This year’s vacation was a bit of a Tour d’Europe.

Böttcherstraße in Bremen. A curious mix of gothic and expressionism. This quick visit left me with the impression that Danes tend to overlook the city in favour of Hamburg and Berlin.

Bruges, boats, canals, cobblestones. And with a little effort, you can in fact lose the masses of tourists. By the way: The Italian and Spanish economies may have tanked but there were loads of Italian and Spanish tourists in Belgium. And the British were less obnoxious than in Amsterdam or Prague.

An intersection in the Upper Town in Bruxelles, officially the weirdest city in Europe.

More photos will be posted here.

PS: I do not have any original or profound thoughts to share about the attacks in Oslo and Utøya. If you read any of the Scandinavian languages, Johan Karlsson Schaffer and Marie Demker have written posts worth a read.

Even if Hamburg in many ways is a bourgeois city, it has never been CDU country. That the party managed to hold power in Hamburg since 2001 had as much to do with protest politics (the now defunct Partei Rechtsstaatlicher Offensive) and the ability of Ole von Beust to navigate the upheavals of the early 2000s as with more fundamental changes in the political mood in the city-state. Still, the CDU miraculously managed to win a majority in the 2004 election and after the 2008 election formed a surprising coalition with the Green Party. Von Beust was nothing if not versatile. He was also helped by the fact that the Hamburg SPD was a mess during much of the last decade.

The SPD victory at Sunday’s early election was a massive one. CDU lost half of its share of the vote while SPD almost won 50% of the vote. Thanks to the 5% threshold, SPD will be able to form a one-party government in the new Bürgerschaft. A good reason to party.

At the same time, SPD was also able to benefit from a number of mistakes made by von Beust and his successor Christoph Ahlhaus. The CDU-GAL coalition made sense as von Beust appealed to culturally liberal Hamburgers, but support did not go so far as to cover a reform of Hamburg’s school system. Germany basically is a society organised along class lines and the bourgeoisie does not like the idea of its children attending the same schools (and school system) as working-class children. The school reform – which was very modest in Scandinavian eyes – suffered a clear defeat at a referendum last year.

The choice of Christoph Ahlhaus as von Beust’s successor made some sense as CDU was trying to rebuild its conservative credentials following the schools debacle – Ahlhaus is everything von Beust wasn’t. Unfortunately, this also meant that he wasn’t from Hamburg or even Northern Germany. It might have worked, had he been from Lübeck, Bremen or even Rostock. Similarly, even if the Hamburger bourgeoisie may be conservative, it is not Conservative. The best SPD leaders have realised this and presented themselves as realist Social Democrats – even if Helmut Schmidt never served as Erster Bürgermeister, he always fitted the bill perfectly. Olaf Scholz may not be the next Helmut Schmidt but his Schröderite credentials and experience as Labour and Social Affairs Minister during the later part of the 2005-2009 Grand Coalition haven’t exactly hurt him.

What could possibly be worse than losing an election?

Try winning one.

This, in the shortest possible words, was what happened to the FDP in Germany and its chairman Guido Westerwelle. Last October, the party recorded its best performance at a federal election since 1949, but within a year two-thirds of the voters had disappeared and Westerwelle is facing demands for his resignation.

As the old poet said: Himmelhoch jauchzend, zum Tode betrübt.

Some aspects of the collapse in the support for FDP may seem slightly odd as Westerwelle could hardly be said to be an unknown factor in German national politics. He had been secretary general of the party between 1994 and 2001, an MdB since 1996 and party chairman since 2001. In 2005 he ran on the promise of forming a government with CDU/CSU and everybody – everybody! – expected such a coalition to emerge from the 2009 election.

On the other hand, much of what made Westerwelle a well-known figure in German politics and public life, may not have been what would make a German statesman. In earlier campaigns he had devised a number of high-profile stunts which did give him a lot of attention – project 18,¹ appearing as a surprise guest in a German version of Big Brother, the Guidomobil – but whose relevance for the urgent political problems of the day was often rather oblique. Westerwelle was the main exponent of what the Germans call “Spassgesellschaft”. Maybe somebody forgot to tell him that the 2008 financial crisis meant that it was – to use another German phrase – “Schluss mit Lustig”.

And given his track record Westerwelle was just about the last person who should complain about German society reflecting late-Roman decadency.

But FDP’s problems go beyond Westerwelle. The party has always been torn between at lest two factions – one market-liberal and one political-liberal (social-liberal is slightly misleading, we are talking about the support for what Germans would call the Rechtsstaat and civic rights) – and it has always been a party lobbying for business interests. This is acceptable for a party with 6-8 percent of the vote. 15 percent – and we are in a completely different ballgame even if (or perhaps especially when) many of the new voters were on loan from CDU and CSU. Westerwelle and the FDP leadership still haven’t learnt the implications of this lesson. It takes more than lowered VAT for hotels to maintain support for a party. Add an incomprehensible sickness insurance reform and voters leave in droves.

As said in the introduction, there are calls for Westerwelle’s resignation as party chairman. The problem is that the only alternative party grandees have come up with is Trade and Industry Minister Rainer Brüderle. Just to illustrate: Let us for the sake of argument imagine that Søren Pind had been the chairman of the Danish Conservatives only to be replaced by Bendt Bendtsen after an internal rebellion. A fascinating prospect.

Party activists argue that Westerwelle, like Hans-Dietrich Genscher, could continue as foreign minister after stepping down as party leader but it is questionable if this is a workable solution. After all, Genscher had been foreign minister in ten years and made his mark on European and global politics. Westerwelle … well, there is the hotel VAT …

1. Given the German history, the name Project 18 was inappropriate as 1 signifies the letter A and 8 the letter H [↩]

Just a follow-up to the previous post: My colleague David Nicolas Hopmann had this electoral poster (in Danish) for Simon Faber which is now hanging in our corridor at SDU.

Maybe I ought to write something about the latest twists in Danish immigration policy – the only problem is that Danish politics these day more often than not makes me want to jump out of the window. It is probably a good thing that I live on the ground floor.

So… in other news:

On Sunday, voters in the city of Flensburg (or Flensborg, as it is called in Danish) elected a new mayor, and none other than Simon Faber of the SSW. This, as far as I can tell, is the first time a representative from the party of the Danish and Frisian minorities holds a political position this prominent.¹

The election has some interesting aspects:

1. The Cities in Schleswig-Holstein elect their mayor (Oberbürgermeister) directly – but the turn-out was dismal. In the run-off election, only 23,3 percent of the electorate bothered to vote. In the first round turn-out was just as bad with 27 percent voting.

2. The question is if abstentions were equally distributed among “Danes” and “Germans”. Maybe the minority was more motivated to vote in the second round?

3. The two candidates in the run-off were supported by coalitions – Simon Faber by SSW and SPD while Elfi Heesch was supported by CDU and Die Grünen. Jörg Klose, the candidate supported by the largest group in the city council, WiF, only managed to attract 9 percent of the vote in the first round.

4. Actually, Faber narrowly edged out SPD’s candidate Thede Boysen in the first round.

5. Electorally, there have been some major upheavals in local politics in Flensburg recently: Both SPD and CDU have suffered major defeats in the last local elections – SPD twice: From 35 to 25 percent of the vote in 2003 and then again to 16 percent in 2008, while CDU went down like a lead balloon in 2008 from 37 to 20 percent of the vote.

All in all, it is probably not too surprising that somebody not attached to either SPD or CDU won the election this time even if I know too little about local politics in Flensburg to get the entire picture.

PS: SSW has a parallel north of the border in the form of Slesvigsk Parti but to be honest, I have no idea if SP has managed to hold the position as mayor in any of the local councils since 1970.

1. Wikipedia tells us that Helmut Christensen – no relation – was acting OB in 1982-1983 [↩]

Before 1940, there was 1864: The war which nearly destroyed Denmark. Among historians, the consensus these days is that Denmark was – if not the guilty, then the stupid part which paid for its mistakes with the loss of two fifths of its territory. The emphatic defeat in the 1864 war left deep marks in Denmark – most notably the view of Denmark as a fundamentally vulnerable state and the impression that They are out to get us, something which may help explain the xenophobia in present-day Denmark and on a minor scale the regulation which bans foreigners (Germans, in particular) from buying a holiday home in Denmark.

Today’s surprising news is that King Christian IX three times during the war contacted Prussia with the offer that Denmark (with the duchies Schleswig and Holstein) join the German Confederation. In that way, Christian hoped, the problem with the different status of Denmark, Schleswig and Holstein could be managed and the entities be kept together under one crown.

Otto von Bismarck, the realist politician’s realist politician, would have none of it. Not out of a wish to humiliate King Christian and the Danes but rather because including Denmark in the Confederation could create unnecessary problems with France – Bismarck was wise enough only to engage in necessary wars which Prussia had a reasonable chance of winning – and because it would include a rather large Danish minority in the Confederation.

While Christian’s proposal may be difficult to understand by today’s standards, it did make some sense when you consider that he was brought up under pre-democratic rule in Denmark and that he for most of his life saw himself as a monarch in the classical European tradition. His task was to defend the interests of the State of Denmark, not the Danes as a nation, and he never really understood the idea of constitutional rule in the meaning that the Monarch should stand back and let politicians run the affairs of the state. On the other hand, the initiative also showed the desperation of the Danish situation and possibly the lack of understanding of the changing ways of 19th Century European politics among the Danish political elite.

But what if Denmark had joined the Confederation? This is a complicated piece of counterfactual (and alternative) history. One problem is if the Confederation had accepted the State of Denmark as one member or if Prussia had insisted on the four constituent parts¹ joining separately. Denmark would have lost its autonomy in foreign policy and would have had the same status as Norway (in union with Sweden) and Finland (a Russian Grand Duchy) but this might have been less of an issue given the country’s descent into international irrelevance. The fortification of Copenhagen would have been a non-issue and this might have eased internal conflicts in Denmark but on the other hand, the political system would have been dominated by the conservative forces. Parliamentarism would not have been introduced in 1901 but only after World War I. Then there is the question of the development of trade relations (especially in agriculture) and so on.

I will offer one guess, though: If Denmark had been a member of the German Confederation from 1864 and later a state in Imperial Germany, the House of Glücksburg would have been swept away by the upheavals following World War I and Denmark – likely to revert to full sovereignty in 1919 – would have been a republic.

1. The Kingdom of Denmark, Duchy of Schleswig, Duchy of Holstein, Duchy of Lauenburg [↩]

Click.

(Don’t worry: It’s perfectly safe for work. Unless you are a German economist)