Merkel’s Pyrrhic Victory over Cameron

By William K. Black

The old line that one should be very careful about what one wishes for – for you may receive it applies to Germany’s installation of Jean-Claude Juncker as head of the EU Commission. Germany’s Prime Minister Angela Merkel has just crushed her UK counterpart (David Cameron) by orchestrating a nearly unanimous vote among EU nations to appoint (not, really, “elect”) Juncker as head of the EU Commission (not, really, “Parliament”).

The old days of needing to hide Germany’s control of the EU through the façade of a German-French partnership are long gone.  EU nations know that there will be a high price to pay for attempting to buck Germany – and that the effort will fail.  Cameron’s effort to block Juncker is generally viewed outside of the UK as quixotic and humiliating while Merkel is viewed as reigning supreme and serene.

The reaction in the UK, however, to Cameron’s efforts is quite different.  Cameron’s efforts are generally viewed favorably and Juncker and Merkel are more unpopular than ever.  If a plebiscite were held today the UK would likely vote to leave the EU.

Merkel has two self-created strategic problems with regard to the EU that threaten the EU and Germany’s dominance over the EU.  First, Merkel engineered Juncker’s appointment not because even she considers him a good leader but as a reward for Juncker’s leading role as austerity’s hit man.  As Ambrose Evans-Pritchard wrote recently:

“Italy’s Beppe Grillo, [has] seiz[ed] on Mr Juncker as the face of the scorched-earth policies that have trapped Europe in a Lost Decade. ‘Wherever Juncker goes in Europe, the grass no longer grows,’ he said.”

To date, Merkel and Juncker’s infliction of austerity on the eurozone has forced the entire eurozone back into a second, gratuitous, recession and Greece, Spain, and Italy back into a second Great Depression.  But the continuing insanity of bleeding the economies of Europe in order to make them healthy may soon gratuitously force France (the EU’s second largest economy) back into a third recession.  The Telegraph reported with a strong tone of Schadenfreude that the “IMF warns of negative spiral in France as recession looms again.”

Worse, the EU’s permanent austerity pact will produce lower eurozone growth and many additional recessions over the next ten years.  As I have explained in prior columns, this is causing incumbent governments in the periphery to lose popularity and leading to dramatic political gains for parties opposed to the troika (the EU Commission, ECB, and the IMF) throughout the periphery.  At the same time, anti-EU sentiment and anti-immigrant phobias are combining even in the core to produce unprecedented gains for parties opposed to increased EU integration.  The austerity policies inflicted on Latin America under the Washington Consensus have led to the election of roughly a dozen leaders who campaigned on a promise to oppose that consensus.  The Brussels Consensus’ austerity policies may eventually produce a similar reaction.

Taken together, the rapidly growing numbers of Europeans hostile to “Brussels bureaucrats,” the anti-Muslim and anti-immigrant parties, and the parties opposed to austerity pose a grave strategic threat to Merkel’s vision of the EU.  The immense human misery she is causing the people of the EU through austerity and her war on worker’s wages are sowing the seeds that will cause her policies to be repudiated.

The second, related, strategic problem she faces is the increasingly likely withdrawal of the UK from the EU.  Spain, Italy, and France have large populations.  Each of them is likely to turn aggressively against Merkel’s policies within a decade.  Cameron’s problems with Juncker have nothing to do with austerity.  Cameron is a strong supporter of extreme austerity.  He opposes Juncker’s strong support for ever greater EU integration. The UK, particularly under the Tories’ rule, would be a vital ally of Merkel in demanding the imposition of austerity.  If the UK withdraws from the EU the core political support for austerity will come overwhelmingly from nations with Germanic populations – against those who speak Romance languages.


The most intense supporters of austerity are eager to share with everyone their utter contempt for the peoples of the periphery.  I receive a steady diet of their insults (not directed at me) in my emails.  It is bad enough when you are in a nation suffering Great Depression levels of unemployment due to austerity and facing your children’s need to emigrate to find a job as soon as they graduate from school.  But it drives humans to rage to see that the response to your pain is derision.  Those that sow the poisonous seeds of austerity and demean its victims will reap the whirlwind within the next ten years.

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