Brexit Would Leave Germany Stranded Against Freeloading South

-OpEd-

MUNICH — The countdown for Britain's decision of whether or not to remain in the European Union is nearing its end. And it is not only the stock markets that are jittery. German business leaders are just as concerned. Fear that one of the strongest partners will leave the confederation of nations is quite unsettling. But beyond the turbulence on financial markets or the damper to trade and investments, the long-term consequences for Europe itself are even worse.

If Europe loses the central role played from Britain, with its cultural open-mindedness and liberal economic zeitgeist, chances of rising out its generation-long economic lethargy would be severely diminished. Those who favor a heavy state role, protectionists and labor unions would become a dominant power. The think tank Open Europe warns that the so-called Brexit would leave Germany and its like-minded Northern European partners unable to form a veto minority against such policies.

With that, hope would vanish that the EU would return to the path of economic growth in the foreseeable future and manage to catch up again with the U.S. and the rising Asian powers.

The EU in recent years has been a mix of good and bad news. On the one hand, you have the Northern European countries registering moderate growth, creating new jobs and embracing information and technological innovation. They profit from globalization, trust free trade and, if in doubt, have faith in the power of the market. On the other hand, you have the Southern European states that have been in deep crisis for the past six years, with debts growing ever larger as their industrial sectors shrink.

But it is not just economics that separates these two faces of Europe. It is about a willingness to change. Those who thought that the economic success of places like Germany, the Netherlands and Denmark could convince the Mediterranean countries to follow their example were severely disappointed.

But even inside of Germany, the power-sharing Social Democrats are giving the impression that the country has to deal with a social justice deficit due to an overdose of neo-liberal reforms. Finance Minister Wolfgang Schäuble is under enormous pressure at home and abroad to take advantage of the low interest rates to end austerity, take out more loans and increase the national debt. Somehow Germany is supposed to follow the example of France and Italy, not the other way around.

But where justice is in short supply is in states that deprive their youth a future by failing to reform the economy. More and more people in Spain, Greece and Italy are among the long-term unemployed. If you count the people who took advantage of early pensions or those who resignedly turned their back on the job market, you come to the conclusion that nearly every fifth person who is fit for gainful employment is chronically unemployed.

Reform or money?

The recent labor strikes in France show that the population does not want reforms, they want to trust the omnipotent state. And because France has significant debt they have decided to join Italy in promoting the idea of a general European unemployment insurance. They do not want Northern European suggestions on how to reform, they only want their money.

The British are thought to be a barrier to a far-reaching, wider European integration. But it is not only the people of the United Kingdom who have become skeptical in the face of Brussels' regulations of domestic markets. Even Germany, which has long supported an ever closer cooperation with Europe, is starting to doubt its stance. The German domestic banking sector, supported by the German middle class, is vehemently fighting against being held liable for supporting ailing institutions in other EU countries.

More and more family run businesses suspect that the disadvantages of trying to save Europe financially through reforms outweigh the advantages. Although the European Central Bank's policy of providing cheap money helps German exports, the cheap money policy increases the costs of promised company pensions.

The world will not come to an end should the British turn their backs on Europe. But it will become significantly more difficult for the economic liberal camp to exert its influence. Many net payers of EU contributions, such as Finland and the Netherlands, may turn their backs in frustration and follow the British example.

Beyond Brexit or No Brexit, the EU needs to change its ways. Brussels is regulating too many sectors that should be regulated by the individual states. Ultimately, Northern Europe cannot be the headmistress of Southern Europe. But it can't be its paymaster either.