Wednesday, 18 July 2012

Waning German solidarity?

Yesterday Angela Merkel made it clear that the next German federal election will be fought on Europe, and that she would continue to fight for the current approach to the crisis (in more detail in German here). Not something to enthuse her many detractors and those who want to see more solidarity in Germany's approach to the Eurozone. But it's not only Europe - the Transfer Union is taking a bit of a knock in Germany too, as the state of Bavaria has taken a case to the German Constitutional Court to complain at the fiscal transfers it has to pay to the other German states.

"Bavaria is not really German", is something you might hear in Germany. The Freistaat Bayern certainly has a very distinct identity within the German federation - Merkel's party doesn't organise there, but allies with the separate sister party of the Christian Social Union, which is part of her governing coalition in Berlin. For now the Bavarian government remains unique in bringing its challenge before the constitutional court, with the other contributing states preferring to continue with negotiations with the recipients. The Bavarian Prime Minister Horst Seehofer (CSU) has been issuing complaints and threats over the Länderfinanzausgleich (clumsy translation: "Financial equalisation of the states") for a while, and has been a firm opponent of Eurobonds and further Eurozone integration. While the idea of banking union - and the move towards the separation of banks from the states - has been generally well received around Europe, Seehofer insists that the state ultimately remains liable for European support: something that contradicts Spain's preferred narrative and direction.

It will be interesting to see how the debate over fiscal transfers in Germany develops, and if it will impact on the wider European debate on the Eurocrisis. Tagesschau has already pointed out that though Bavaria is by far the largest contributor, it has also benefited a lot in the past from fiscal transfers. In any case, it serves as a reminder that German state politics have the potential to impact on the European debate, and that talk of any kind of European transfer union will be compared to the state of the German one domestically.

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