Growth of a Strongman: Germany Rising Again!

Europe has suffered devastating wars, again and again, over many centuries. Kingdoms and alliances of nations have battled each other for dominance. For more than a thousand years, European "Christendom" fought Muslim invaders in such diverse places as Spain, France, Italy and Austria.

Throughout all this, the German people have been "sandwiched" uncomfortably between two great powers: Russia to the east, and France to the west. Modern military historians often attribute Germany's belligerence and general unease with its neighbors, at least in part, to this lack of natural geographic security. On three occasions in modern times—in 1871, 1914 and 1939—an ambitious and aggressive Germany chose first strikes against France to forestall a later two-front war.

Some strategic thinkers in Germany have long had dreams of dominating Europe in a controversial plan called Mitteleuropa, but in military implementation it has always failed. The word Mitteleuropa is used as both a place and an idea. Geographically, it is the Germans' general area of central Europe, and conceptually, it was a plan first presented around 1915 for German domination of the region.

Are the Germans now in a position to have by economic means the domination they never achieved militarily? A growing number of analysts are saying that the adoption of the euro as the common European currency makes this outcome inevitable. But the same economic factors that made Germany's economy strong relative to some other EU countries are also destabilizing the EU monetarily. What lies ahead for the euro and the European Union? And what perspective does the Bible give on these rapidly developing events?

The Euro: Tie That Binds

The euro was conceived as a means to bind the diverse nations of Europe together in an economic union that would render the continent's perpetual wars obsolete. The economic interdependence that the euro provides, along with the shared European marketplace, would preclude military conflict between the nations. To the French, the euro was an ideal means to contain their old adversary, Germany, as it would also lead to greater political union.

The countries that officially use the euro—16 of the 27 European Union members—are called the euro-zone. They are: Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain. Notably, the United Kingdom, Sweden and Denmark have not yet decided to convert to the euro, preferring to keep their own currencies. But there are non-euro-zone members that use the euro, including Andorra, Kosovo, Montenegro, Monaco, San Marino and Vatican City. An estimated 327 million Europeans daily use the euro. While the euro is the world's second largest reserve currency (behind the dollar), as of 2009, the euro actually has more value in circulating banknotes and coins than the U.S. dollar has. After it was introduced in 1999, the euro quickly became a power to be reckoned with.

But within the European Union, some nations are economically stronger than others. Germany's industrial productivity outstrips the more agrarian economies of Spain, Portugal and Greece. Because of Germany's greater industrialization, German workers tend to add more value per hour of work. Under the euro currency regime, Germany inevitably became an export-led economy and has been running large surpluses relative to the other EU countries.

"To be sure, German wages are high, but even higher productivity means it is relatively cheaper to hire workers and produce high-value manufactured products there, even compared with traditionally lower-cost Greece, Portugal or Spain… That doesn't mean German workers come cheap. Their manufacturing wages and benefits are among the highest in Europe, at about €34 [$42] an hour… Greece's are half that; Portugal's even lower" ("Europe's Stragglers Find Villain," Wall Street Journal, March 22, 2010).

The German workers and industrialists have earned their place.

The German worker is paid more but produces significantly more value per hour than counterparts in other countries, giving the overall German economy an advantage. The Germans are aware of this and strive to maintain it.

"By keeping a lid on labor-cost growth, Germany's exports are able to compete on price despite a high euro. But that comes at the expense of market share for others in the euro zone, critics say. Whereas Germany ran up €136 billion [or about $167 billion] trade surplus last year, Spain, Greece and Portugal all ran sizable deficits.… There are three ways for countries to make their products attractive globally: rein in labor cost growth; improve productivity; and devalue currencies. The last option isn't available to the euro zone which has a single currency" (ibid.).

So the German advantage persists—due in no small part to the euro.

Beware of Greeks Bearing Bonds

Greece has long elected leftist governments. This has resulted in very high fiscal deficits and massive government borrowing due to its weak economy and generous welfare state benefits. The Greek people and Greek politicians have grown dependant on this system, and changing it is extremely difficult. But Greece's debt burden is unsustainable. The total government debt is greater than the country's annual output, and it has not only been growing, it has been accelerating in its growth. Now the government has reached the limit of new debt that its creditors will finance, and refinancing its maturing debt has become difficult and expensive. When other countries have faced this problem, they have devalued their currencies, enabling them to manage the debt. But the Greeks are in the euro-zone and their currency is the euro. They cannot devalue it at will. The possibility of a sovereign default by Greece has sent shock waves through the European Union.

And that is just the bad news. The worse news is that Greece's trouble is only the first small wave of a tsunami of debt problems preparing to break on the coasts of the European Union. Four other European countries,with much larger economies, are heading for the same rocky shore. Portugal, Italy, Ireland and Spain—along with Greece collectively called the PIIGS—all have huge deficits that are approaching the limits of what can be financed. These nations will have to face severe cutbacks in government wages and government benefits if they are to control government spending and deficits. As German Economics Minister Ranier Bruederle said, some other EU nations have "lived beyond their means and neglected their competitiveness" (ibid.).

"Many European officials have expressed concern that if Europe doesn't act to save Greece from default, the country's problems risk spreading to other European nations, endangering the euro." ("Greek Debt Crisis Seen Getting Worse," Wall Street Journal, April 20, 2010). They have Spain and Portugal specifically in mind. A Greek default would be a shock. A default by Spain or other euro-zone nations would be a catastrophe for the euro—by early June, the value of the euro had already tumbled to a four-year low, with further uncertainties ahead.

Economists are already saying that bail-out packages proffered by the European Union and International Monetary Fund may be enough to forestall the further spread of Greece's problems for a while, but will not be enough to prevent similar—or far more severe—defaults from bringing the other PIIGS nations to the brink of economic disaster. And over all of this, Germany looms as the economic powerhouse running the show, setting the terms for other nations to partake of economic aid.

Other EU countries want Germany to increase its domestic consumption and reduce its hard-earned economic advantage. France has criticized German export dependence as being partly to blame for the current crisis. Germans have reacted angrily to this. German Chancellor Angela Merkel bluntly said, "Germany will not forfeit its export strength" ("Merkel Floats Option of Euro-Zone Expulsion," Wall Street Journal, March 18, 2010).

It remains to be seen whether the people of Greece—and the politicians—will tolerate German micromanagement of their economic affairs. But even in the best-case scenario, short-term measures like the bail-out can only take care of short-term problems. The EU and Germany will likely face the same problem again, before very long, multiplied by the problems of Spain, Portugal and Italy. Germany would like to use its current leverage to force long-term structural changes in the EU, such as greater EU fiscal control of member nations. Germany will have to pay in the short term, but it will trade for long-term advantages.

All this produces a big political problem for German Chancellor Angela Merkel, because the German taxpayer has been loath to bail out Greek workers just so the Greeks can retire earlier than the Germans. Chancellor Merkel will ultimately want far-reaching changes in exchange for Berlin's largesse. These days, Germany negotiates from a position of power.

"Calls have grown for Germany to 'rebalance'—to buy more from struggling European neighbors so they can keep more money at home. German officials including Finance Minister Wolfgang Schäuble have been adamant that it is better to be Europe's 'locomotive' than its open-wallet patron" ("Smaller euro nations trail Germany's 'locomotive,'" Washington Post, June 2, 2010). What does this mean in practical terms? "Without a national currency, Greece as well as larger debt-ridden economies such as Spain lack an important tool—the ability to devalue their money and make their goods cheaper and more competitive. Germany is seen as the flip side of that equation—the industrial powerhouse that profits by drawing money from European countries caught in the orbit of the common currency" (ibid.).

The days of cheap credit and profligate spending are over for the PIIGS nations. Germany is maneuvering from a position of strength and, over time, will likely have its way in whatever restructuring the EU implements to cope with possible recurrences of the Greek debt crisis.

Never Waste a Crisis

The Hudson Institute's Irwin Stelzer commented, "European politicians seem to have learned from their counterparts in the Obama administration. Rahm Emanuel, Barack Obama's tough-minded chief of staff, surveyed the inherited wreckage of the American economy, and told the President, 'You never want a serious crisis to go to waste.' No one can accuse the EU politicians and their bureaucrats of wasting the serious crisis created for the Eurozone by Greek profligacy" ("Greek Problems Will Drive Integration," Wall Street Journal, April 19, 2010).

Stelzer goes on to comment, "For the proponents of greater European integration Greece's crisis is their opportunity to push their agenda further than they would have dreamed possible had the Greeks not cooked their books and gone on a borrowing binge to support the lavish life style of the ever-increasing number of government employees."

Stelzer points out that Greece's crisis gives proponents of tighter European integration a new opportunity to push their agenda. Certainly, many observers had known all along that a common currency and single EU-wide interest rate would result in problems in the absence of a unified fiscal policy. But, as Stelzer notes, "So long as the world's economies were booming, this kink in the armor of Europe's integrationists was of little consequence. Germany's export machine kept rolling, Greek consumers kept importing, borrowing at attractive rates to pay for the imports, and all seemed well… Except that it wasn't. So the not-to-be-wasted crisis is upon the euro zone" (ibid.).

Germans—who are now being asked to cough up €100 each to enable Greeks to retire earlier than any German can hope to—may soon be asked to give similar support to Spain, or Portugal, or another south European country. Is it realistic to expect Germany to keep paying more and more, without demanding greater representation in the fiscal affairs of the beneficiary countries? Selzer observes: "We are about to learn just how much additional sovereignty each euro-zone nation is willing to surrender as Europe takes another step—a giant step—down the road to more complete economic integration" (ibid.).

A centrally governed, federal European Union may be more plausible now than ever before. In a recent speech, Adrian Hilton, author of The Principality and Power of Europe, put it bluntly. He said, "There will be a single fiscal policy… and a single taxation." The current 27-nation EU, through its current internal conflict, is laying the groundwork for the super-power ten-nation (or "kingdom") entity foretold in Scripture.

Great crises can become vehicles for great change. But it may require a crisis greater than the current one to produce what the Bible indicates will be the final outcome of these events.

The Return of Mitteleuropa?

Whether or not German leaders choose right away to pursue the century-old dream of Mitteleuropa, they are in a position to begin asserting economic hegemony over the rest of the EU. What changes can we expect to see in a future Europe? We can find the answer in Scripture.

The Bible is a unique book in that it focuses especially on a 7,000–year period of time—human history—and does so from God's point of view. This God is not some abstract unknowable force; He is the God of Abraham, Isaac and Jacob, who explains that He can tell the end from the beginning (Isaiah 46:8–10). Scripture—His word—illuminates both past and future events in the context of His plan for humanity, which He has foreordained to carry out in a prophetic "week" of seven millennia.

It is important to keep this format in mind when reading prophecy. In biblical chronology, we are near the end of the sixth millennium of this period. The next thousand years, the seventh, will be the millennial Sabbath rest known as the Kingdom of God (Hebrews 4:1–11). When we view the Bible in this context, it is easy to see why God's word is as relevant today as it was long ago. A person living at any point in time can be informed by it. God's plan is constant, unchanging and important to everyone throughout history.

Much of Bible prophecy deals with events at the close of our present 6,000–year period of history and the start of the last day of the prophetic "week"—the thousand-year millennial reign of Jesus Christ as King of kings on planet Earth. Before Christ sits on His throne as supreme benevolent Ruler of this planet, He will be opposed by human governments—including those of a great European superpower that will arise at the end of our present age. That superpower will be composed of ten kings or governments under the influence of a powerful religious entity.

Tomorrow's World has long explained that the German people are identified in prophecy as Assyria. Even though these remarkable people were crushed by Allied might in World War II, they are rising again to power and prominence in Europe. Look for Germany to lead the way in trade dominance, finance, economic power, political muscle and revived military force in a federal EU.

Through the prophet Isaiah, God said, "Woe to Assyria, the rod of My anger and the staff in whose hand is My indignation. I will send him against an ungodly nation, and against the people of My wrath. I will give him charge, to seize the spoil, to take the prey, and to tread them down like the mire of the streets. Yet he does not mean so, nor does his heart think so; but it is in his heart to destroy, and cut off not a few nations. For he says, 'Are not my princes altogether kings?'" (Isaiah 10:5–8).

But lest we misunderstand the role of Assyria against the "ungodly nation," we must understand that God is using that nation to bring about His will. And the time will come when God will eventually use that remarkable people in a peaceful way. "In that day there will be a highway from Egypt to Assyria, and the Assyrian will come into Egypt and the Egyptian into Assyria, and the Egyptians will serve with the Assyrians. In that day Israel will be one of three with Egypt and Assyria—a blessing in the midst of the land, whom the Lord of hosts shall bless, saying, 'Blessed is Egypt My people, and Assyria the work of My hands, and Israel My inheritance.' (Isaiah 19:23–25). Keep watching events in Europe, and Tomorrow's World will continue to illuminate those events with the light of biblical prophecy.