Germany frets about its EU dominance If Britain votes to leave

[MikeWB]

Berlin fears dominant role would be undermined by Brexit

The surge in support for the campaign to take Britain out of the EU in next week's referendum is rattling its partners, above all Germany.
While Chancellor Angela Merkel maintains her characteristic sangfroid, her colleagues are letting the strain show. Foreign minister Frank-Walter Steinmeier told a conference last week: "If it really comes to Great Britain leaving, then the EU will find itself in a deep crisis."

Almost as he was speaking, financial markets were falling: the euro is 1.5 per cent down against the US dollar in a week, and the Dax German share index 5 per cent lower. Yields on the German 10-year bond have turned negative.
But market uncertainty is the least of Berlin's concerns. The finance ministry thinks Europe's markets can pull through any Brexit-related turbulence especially as the European Central Bank has proved it can contain shocks.
German industry frets over the potential impact on its complex trade relations with the UK, its third-biggest export market. But with domestic growth strong, executives think they can take the hit if they have to.
For Ms Merkel the problem is not economic: it is political. Their biggest fear is for the stability of the EU and Germany's dominant role within it.
Brexit could encourage other member states to follow suit, or at least take a much more Eurosceptic stance. The most serious threat comes not from eastern Europe's shrill nationalists, since EU subsidies and fear of Russia should help keep them in line. Berlin worries more about anti-EU sentiment in the union's western heartland, not least France and the Netherlands.
Decades-long integration efforts could come to a juddering halt. As finance minister Wolfgang Schäuble warned last week, a Brexit vote would mean the end of "business as usual".


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EU officials are examining initiatives away from the EU's traditional economic agenda — security, for example, external borders and foreign policy. They feel these issues could, under the right circumstances, appeal to a public concerned about both jihadis and refugees.
But who could lead such a push? The view in Berlin is that Brussels may not be right for heading such a campaign, given that many EU citizens share Britons' antipathy to the euro-bureaucracy. But if not Brussels, then national capitals must take the lead, and if national capitals, then Berlin must play the central role, given its political weight.
But there is a catch. The chancellor has tackled the four recent crises — the global financial shock, the Greek rescue, the Ukraine conflict and the refugee influx — by taking the lead and often riding roughshod over her partners.
This has generated hostility, notably in southern Europe over German-led austerity and Russia sanctions, and in eastern Europe over refugees. It is not only in Greece that Germany is cast as the bully boy.
Ms Merkel has shielded herself with allies. But if the UK went, the choice of heavyweight partners would shrink. The EU would lose one of its biggest three states, a country with world-class diplomatic and military skills, a voice for market-oriented compromises.
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If Germany then assumed a greater leadership role, it would be even more exposed to charges of hegemony. Hungarian prime minister Viktor Orban's accusation of "moral imperialism" — aired in the refugee crisis ——could soon sound tame in comparison. How long would it be before the shocking cartoons of Ms Merkel and her associates as Nazis become commonplace?
But if Germany stood by, for fear of appearing overweening, it would risk leaving a vacuum others would quickly fill, notably nationalists empowered by a Brexit vote. They are already champing at the bit, not least Marine Le Pen, leader of France's National Front, who says she sees Britain leaving as the beginning of the end of the whole EU.
Berlin could respond by rallying solidarity-minded countries, notably EU aid recipients from the Baltics to Portugal. But if that brought bigger transfer payments, then the scepticism in the EU heartland — including Germany — would only grow.
As Mr Steinmeier concluded this week: "[We] would not just carry on as 28 minus one. It would require concerted efforts to ensure that . . . a decades-long, successful integration effort does not end in disintegration."
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