LS : On a blog post last year, referring to the stark contrast between their visions for Europe, you said Berlin and London were on a collision course. While the German chancellor advocated for greater fiscal and political union, the British prime minister called for a flexible Europe. These two countries disagree on other things : the two attach a different value to military power and have found each other on different sides of the fence over a number of international crises in recent years (like Iraq and Libya). Do you think there is any way in which the British and German views of Europe and the world can be reconciled ?
JLF : Let me first explain the fundamental problem over Europe. The Germans want to integrate the Eurozone to impose greater fiscal discipline on European Union members. This is clearly a political project that will involve a much closer relationship between Germany and the European Commission. The political implications of this process are very deep. At heart, this is about Germany having a far greater influence over European economies. The consequence is that it rebalances the relationship between the individual and the state in favor of the latter. This is fundamentally against Britain’s political DNA. In fact it is against the whole Anglo-Saxon political DNA (we must bear in mind that the American revolution was an extension of the English Civil War). Britain’s vision for Europe has always been that of a Free Trade Area, respectful of private enterprise and national sovereignty.
Regarding the British and German world views, the fundamental difference boils down to the balance that is struck between hard and soft power. We the British essentially believe you cannot have soft power without an important degree of hard power. Whereas the Germans, for understandable historical reasons, believe one can exercise economic power and political power without necessarily having military power. An interesting case is France, which shares the German political view of the need for an integrated Europe, and yes the British strategic view about the need for hard power. Can the British and Germans find some common ground ? Yes, of course. Can we develop a common strategic culture ? Unlikely.
But going back to Europe, I think the main problem is that the Germans are in denial about how serious the current Eurosphere crisis is for Britain. We could indeed leave the European Union if the wrong decisions are made. The Germans find it very hard to understand why Britain does not share their vision of Europe. But Britain will never share their vision of Europe.
LS : It sometimes seems that France is pulled between its politico-economic ties to Germany and its military-strategic relationship with Britain. Given the current European political climate, will Paris be able to maintain the two or will it come to choose one over the other ?
JLF : It will have to choose, and for various reasons. The Euro will survive because it is first and foremost a political project. Greece will be put in a ‘box’. The focus of the European Union should be on ensuring the restructuring of other southern European economies, particularly Italy and Spain. But also, partly, that of France. The furthering of the Eurosphere will over time further dilute France’s strategic relationship with the British and the Americans. Because the British are already making it clear that they are going with the Americans and are embracing the Anglosphere as a strategic concept. In a sense both Britain and France are trying to maintain a balancing act, but neither will be able to do so for much longer. When push comes to shove France will go with Germany. This is because France is tied to the Eurosphere economically, politically and philosophically. It is after all a continental power. Britain is not. I regret the dilution of the Franco-British strategic relationship. But there is a reordering of power in Europe around Germany and France at least cannot escape that.
LS : You have also highlighted the importance of Franco-German pushes for an European Union-wide Financial Services Transaction Tax or their calls for greater European financial and banking integration. The two could hurt the United Kingdom more than any other Member State, putting London’s status as a global financial hub in jeopardy. Some argue that this could lead Britain to distance itself further from the European Union. How do see these debates playing out over the coming years and what impact do you think they will have upon the political and strategic balance among the European Union’s Big Three ?
JLF : It will indeed have a decisive impact on Britain’s relationship with the European Union, maybe not during this parliament, but certainly during the course of the next parliament. Some eighty percent of European financial transactions go through the City of London. What the European Union is effectively doing is imposing a tax on the British economy for a problem that is not of Britain’s making. There is no such thing as a free tax. The Eurozone is trying to shift the cost of the Eurozone crisis onto British taxpayers. This is what this whole debate boils down to. And this is unacceptable for Britain, because the economic balance of Britain’s European Union membership is already negative. Unless Eurozone leaders soften their stance on this, the tax could be the trigger of the coming political crisis between Britain and the European Union. A financial services tax will be seen in Britain as an attack on Britain.
Now, about the strategic implications…If this were to go ahead it could strengthen Frankfurt, which will try to manipulate this in its favor to strengthen its standing as a financial centre. But the costs of moving out of London for the banks and other financial companies would be huge. What makes London attractive is the lack of regulation. And given that the British economy is so reliant on the City for revenue, there is a fundamental national strategic interest to maintain London as a global financial centre and keep the focus for Asian, Middle Eastern and other global markets. Additionally, of course, London would keep its economic ties to Europe and, if it were to leave the European Union, it would insist that World Trade Organisation regulations are respected.
It is easy to depict this debate as integrationists vs. anti-integrationists. But portraying London as anti European economic integration is unfair. In fact, an important reason why Britain is frustrated with the European Union is the fact that the financial services market is not sufficiently integrated. This is because Germany blocks it. Why ? Because British financial services companies are more competitive than Germany’s. So there is a huge hypocrisy in the continent about Britain being the anti-integration.
LS : Let us now turn our attention eastwards. Over the last decade, the stability brought about by European Union and Atlantic Alliance enlargement has allowed Germany to significantly expand its economic and political influence in Central, Eastern and parts of South-Eastern Europe. In parallel to this, we are now witnessing an increasingly confident Russia, whose economic influence (particularly in the energy sector) is expanding too along many of these areas. Are the two processes compatible ? How do you think the German-Russian relationship will evolve over the next decade ?
JLF : First of all, Germany’s roots in Central and Eastern Europe have been a massive source of good. It is very easy to fall into cheap parallelisms with Germany’s past aggressive behaviour in these areas. But the German state today is completely different from any other past German states. The stability of Central and Eastern Europe is hugely guaranteed by Germany ; by German economic power. So this has been a very benign process. And if the political and economic integration of the Eurosphere continues, the process of German influence in Central and Eastern Europe will continue too. But this is something Central and Eastern Europeans accept and welcome. Because, even if Germany is ultimately in charge, Brussels is the political connection. This is a good deal for them.
What worries me is Russia. The German view of the world is a strange mix of modern and post-modern power. Russia is modern : it sees balances of power and spheres of influence everywhere. Now they perceive they can use energy to restore their influence over the Baltic States, over Bulgaria, Romania, etc. It will be interesting to see how Russia tries to modernise its armed forces in order to support its soft power in some of these places. But the German and European approach towards these areas is very different. It is post-modern. This contrast can be appreciated by looking at Gazprom and the European Commission’s doings. The Kremlin is clearly using Gazprom as a political instrument. The European Commission, for its part, is seeking to have Gazprom’s doings in those countries respect European procedures and norms. So this is not a German versus Russian struggle in the classical sense. I by no means blame Germany for its influence in Central and Eastern Europe. I think Germany will play a very responsible role there. The question is, that if the credibility of American hard power commitments to Central and Eastern Europe decreases, European power (with Germany at its core) will have to replace it. Otherwise the Kremlin will see an opening. And my worry is precisely that Europeans will try to replace American hard power in Central and Eastern Europe with soft power. So I fear a crisis at some point will come. And we need to be realistic about this : I fear as Germany becomes more powerful economically and politically Europe becomes less powerful militarily because of history. This is the great danger. And I think the planners in the Kremlin see a big opportunity here.