on geopolitics

Lessons in Unification: Germany's History and the EU's Future

George Friedman
Founder, Stratfor
12 MINS READAug 13, 2013 | 09:13 GMT

By Marc Lanthemann

Europe's leaders will soon return from summer vacation, and when they do, they will be forced to confront problems that persisted in their absence — namely, high unemployment and a looming consumer credit crisis. Some have expressed optimism over recent improvements in the European crisis, but German leaders may be less assured. More than anyone else, they understand that the debate over whether the European Union should integrate further is unavoidable; further integration may be one of the only ways the bloc can outlive its current problems. 

They understand this because Germany's own unification was such an arduous process. It took decades of war, major technological shifts and extraordinary leadership for the various German mini-states to unify. Ultimately, they came together for one reason: survival. Now Germany must once again measure the risks and rewards associated with integration, only this time for the sake of preserving the whole of Europe. But there is a limit to how much Berlin is willing to sacrifice for a group of nations that innately distrusts German power.

Partial Execution

As a model of governance, the European Union failed simply because it was never executed fully. In 1992, a few countries within the European Union's free trade zone agreed to abandon their own currencies for a common currency, thereby relinquishing their monetary policy to a centralized bureaucracy, the European Central Bank. They did not agree on what their next steps should be toward further fiscal, and thus political, integration. The eurozone has since expanded to include 17 countries, but it did little to change the fact that the value of money was created in one place but spent in another.

This arrangement proved to be an extraordinary generator of wealth in times of global prosperity, so long as financial markets regarded Greece's economic risk to be on par with Germany's. But it left the eurozone uniquely unequipped to deal with large-scale economic crises. Without monetary control, individual countries could not devalue their currencies — a common practice for escaping recessions. Meanwhile, EU institutions were unable to implement and enforce a coherent strategy because they lacked the fiscal and political control over their constituent members. By dividing power between the countries and a centralized bureaucracy, each part is left unable to move effectively, and the entire system becomes paralyzed.

In its current form, the European Union is inherently unstable and unsustainable. However, many Europeans still believe the Continent can and should be unified; for them, unification is a path out of the current crisis. And they are right to think so. In theory, a federalized Europe would be more stable and more prosperous than the current hybridized system.

These are only the most recent Europeans to dream of a unified Continent. Many before them have attempted to bring so many countries under the aegis of one polity, but none were able to bridge the interests of so many powerful nations. The problem is that their attempts began with bloodshed and ended in chaos.

Though it is not a perfect analogy for the formation of the European Union, Germany in the 19th century is perhaps the best example in modern history of a successful unification. Unlike Europe, Germany was the product of polities with common ethno-linguistic roots. Nonetheless, its composite parts were an assortment of competing mini-states whose sacrifices helped build a prosperous nation. German history could inform Europe's understanding of the true costs of unification. For its part, Berlin should bear in mind the lessons of unification as it is forging a true European Union, should it choose to do so.

Shared Legacies

More often than not, new political systems are rooted in the ashes of war. The European Union and Germany share this tradition. Theirs is a legacy of birth marked by conflict so severe that it destroyed the old system and gave way to unorthodox solutions previously unthinkable.

The European Union came from the trauma of World War I and World War II. This 30-year period brought what was then the most powerful group of nations in the history of the world to its knees, leaving behind a ruined, exhausted and divided Continent.

The Napoleonic Wars brought about modern Germany. By the end of the 18th century, Germany's predecessor, the Holy Roman Empire, was composed of nearly 200 quasi-independent states in an area that covered what is now Poland, the Czech Republic, Slovakia and many others in Central and Northern Europe. This disunited band of bickering principalities, duchies and electorates was utterly incapable of standing up to the citizen armies unleashed after the French Revolution. The revolutionary armies eventually consolidated under the control of the general-emperor Napoleon Bonaparte, easily defeated the haphazard coalition of German forces and their allies and steamrolled through Europe before reaching Russia.

It took 22 years and six successive coalitions by all the major European powers to finally defeat the French armies. The Holy Roman Empire had been completely dissolved and the Napoleonic Empire, through its chief diplomat, Charles Maurice de Talleyrand-Perigord, had encouraged a process whereby small German states would be incorporated into their larger neighbors to ease political transitions. By the early 19th century, only about 40 German entities remained.

The French Revolution was as instrumental for creating Germany as the two world wars were for creating modern Europe. The French Revolution created new ways of thinking about what it meant to be a nation-state. Years of bloodshed left behind a group of exhausted nations conscious of their own weakness as the world around them changed. However, a different kind of revolution was necessary to spur the creation of a united Europe. The prospect of economic gain would have to entice individual nations to integrate more closely. For Germany, that event was the Industrial Revolution; for Europe, it was the global economic boom of the 1980s and 1990s.

Throughout the 19th century, technological advances in manufacturing processes made manufacturers radically more productive. New transportation technologies, particularly the steam engine, enabled nations to become internally connected through rail and to reach more consumer markets. The Industrial Revolution began in England and eventually spread to the Continent.

But Germany remained politically fragmented, unable to join this revolution or embrace an industrialized economic model. Prior to the Industrial Revolution, political fragmentation was only modestly restrictive; most of the Continent relied on agriculture, not industry. But the development of high-productivity manufacturing required large amounts of unevenly distributed mineral resources and free access to large amounts of consumers, conditions that put the various fragmented German mini-states at a serious disadvantage. Products manufactured in Prussia had to be inspected and taxed as many as a dozen times before reaching Wallonia, where coal and steel had to undergo the same ordeal in the opposite direction. This created huge additional costs for German industries and stunted the development of the German states. The resultant economic imbalance was one of the many catalysts for the German revolutions of 1848.

In the late 20th century, modern Europe believed it had to remove tariffs and the restrictions on capital movement if it were to keep up with the growing economic and political might of the United States and Japan. These two economic powers dwarfed even the greatest individual European nations, but as a whole, Europe remained the wealthiest part of the world. For Europe, like Germany in the 19th century, a free economic zone was the logical next step. 

At the behest of Prussia, a small number of German states formalized a customs union in 1834 that eventually reduced or otherwise abolished tariffs, created a single labor market and integrated capital markets. Starting in the 1840s, Germany's first rail links were laid across the members of the customs union, establishing an increasingly prosperous domestic market and bolstering Prussia's pre-eminence among German states. The union continued to expand over the years but always stopped short of becoming a monetary and banking union.

Prussia saw little interest in diluting the strength of its banking sector before guaranteeing its control over the fiscal and economic policies of the other members of the customs union. It is at this point that the unification of Germany and the unification of the European Union begin to diverge.

Unlike 19th century Germany, modern Europe pushed the boundaries of the trade union and has created a European Central Bank that administers the monetary policy of a steadily increasing number of member states. While nations were willing to relinquish control of their currency, tempted as they were by the promise of accumulating even greater wealth, they are not as willing to surrender sovereignty over their fiscal policy. Many see no reason to give Brussels control over their military or energy budgets, for example.

Moreover, the European Union also lacks an internal leader that is willing and able to act decisively. From the very beginning, Prussia shaped the unification of the German nation. It had gained some 500,000 subjects and 10,000 square kilometers (nearly 4,000 square miles) of land after the Napoleonic Wars and had the best land army in Europe. Like Prussia, modern Germany is the wealthiest and most powerful member of its respective trading bloc, yet it has continuously balked at assuming leadership of the European Union. In a telling anecdote, when financial markets were reeling from uncertainty over a string of bailouts, Poland's foreign minister famously said in 2012 that for the first time in history his country feared German inaction more than German action.

No 'Blood' or 'Iron'

Germany's reluctance to be Europe's leader is perfectly rational for Berlin. In fact, its reluctance highlights another key difference between Chancellor Angela Merkel's situation and that of her most illustrious predecessor, Otto von Bismarck. The original design of a united post-war Europe was foreign-made. A trade union in Europe served the strategic interest of the United States. While modern Germany has greatly benefited from the European Union (more than anyone, in fact) as a trade union, it is far from certain that a full fiscal and political union is in Berlin's interest. It is not even clear that it would solve the great problem in modern Europe: the current economic and social crisis.

The wealth of Prussia's customs union was not a means in itself for Prussia, although it greatly contributed to its strength. Prussia's national security was at stake. The Napoleonic Wars and the slow but steady expansion of the Austrian and Russian empires made it very clear to Prussia that only a political, economic and military union of German-speaking people would guarantee its security. 

Such calculations are nearly absent from German strategic thinking today. There are no security threats to the core of the European Union that could spur Germany into action. Even Russia has understood the lessons of the Soviet Union and, for now, appears content to focus on maintaining its own domestic stability while making only modest forays in Central Europe. Thus there is nothing driving Germany to push for further integration with the European Union.

The question then is whether Germany's imperative to preserve the trade union, on which much of its economic prosperity depends, will merit a stronger push from Berlin. The case study of Germany offers yet another cautionary tale regarding the true costs of the next step to unification.

In 1862, after being appointed Prussia's minister-president and foreign minister, Bismarck appeared in front of the parliament and delivered a historic speech asking lawmakers to approve a massive increase in Prussian military spending. Bismarck noted that the great problem of German unification would be solved only by "blood and iron." Bismarck clearly understood that the alignment of economic interests that had created the customs union had reached its limit and that the next phase in the creation of a wealthy and secure European state would have to involve coercion.

Bismarck turned out to be right, and modern Germany was born on two battlefields, 800 kilometers and four years apart. In 1866, the Prussian armies defeated Austria and its German allies at the Battle of Koniggratz, in the modern-day Czech Republic. The battle settled the Prussian-Austrian war and firmly excluded Vienna from its position as a contending head for the German states. It left a union with Prussia as the sole viable path for German security and prosperity. Bismarck had thus crushed all internal dissenters to a united Germany under Prussia's aegis. Notably, he did not forcefully incorporate them into Prussia's orbit even though he could have easily done so. Instead, he fabricated a foreign threat from a historical foe, Paris, to bring them into the fold.

In July 1870, Berlin coaxed Paris into an offensive action against Prussia after some creative diplomacy by Bismarck. The memories of the Napoleonic Wars prompted the last independent German states to rally under the Hohenzollern banner. Two months later, the superior Prussian army trounced the French at the Battle of Sedan and captured the French leader, Napoleon III. In 1871, in the palace of Versailles, Prussian King Wilhelm I was acclaimed as the kaiser of the new German Reich.

Today, France and Germany find themselves once again at the core of the European political system. Stratfor has often written that the fate of the European Union rests on the stability of the Franco-German alliance, the foundation on which more than six decades of European peace is based. As the crisis worsened, the differences between the French and German models have become more pronounced, and tensions have begun to rise accordingly.

Today it is unthinkable to imagine Merkel delivering a "blood and iron" speech at the European Parliament. However, building nations from several composite parts necessarily requires redistributing wealth and power, an approach that runs counter to the sovereignty of the constituent entities. At some point, nations must be coerced, though military coercion is by no means the only available option.

This is where the analogy between the European Union and 19th century Germany ends. It is increasingly unlikely that a true fiscal and political union in Europe can be achieved by aligning the interests of the constituent nations. However, there does not seem to be any pressure on Germany to force other nations into a more integrated union.

Many Europeans hope Germany's September elections will usher in a more assertive administration and bring about the end of the European crisis. These people would be well served to look at Germany's history to fully understand the cost of unification.

Writing this week in George Friedman's stead is Marc Lanthemann, a geopolitical analyst at Stratfor. 


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