POLITICS
Herr Kohl is in trouble good news for Messrs Clarke, Blair and Brown
BRUCE ANDERSON
Chancellor Kohl has been compared to Alberich, the malevolent dwarf who steals the Rhinemaidens' gold at the beginning of the Ring cycle; for Rheingold, read Bun- desbank gold. But this is unfair, morally and physically. Herr Kohl is much more like Faftier and Fasolt, the giants who demand the gold due to them for building Valhalla. Though they eventually extort it from an unwilling Wotan, this leads to their destruction — and to almost everyone else's.
Herr Kohl's mistakes were not economic but political. He was proposing neither embezzlement nor the abandonment of fis- cal and monetary restraint. There was nothing wrong with using the gold profits to reduce Germany's indebtedness, but the idea would have had to be sold to the Ger- man people and, above all, to the Bundes- bank itself. As it is, by the abrupt manner of his announcement, the Chancellor sounded like the shifty chairman of a trou- bled firm who had suddenly discovered some wheeze that enabled him to declare record profits. The Germans do not believe in wheezy national finance, and though Herr Kohl has now executed a deft retreat worthy of Loge, there will be lasting dam- age to his political standing, which had already been undermined by Germany's economic problems.
Great historical forces often appear at their strongest when, in reality, they are well past their meridian and incapable of resisting the dagger-thrusts of change; the Spanish empire, the British empire and the British trade union movement are obvious examples. But it would be premature to conclude from Herr Kohl's embarrass- ments that the project for European mone- tary union leading onwards to political union is another such.
There are problems. Now that the French have changed government, while the Germans, deservedly or not, have for- feited much of their moral authority, it is impossible to believe that a hard Euro- currency will come into existence on 1 Jan- uary 1999. M. Jospin will no doubt reiterate his enthusiasm for the euro. He does not want a breach with Germany, which would be the end of the great illusion of post-war French diplomacy that Europe means a French jockey on a German horse. But the new French Premier has no intention of pushing ahead with the supply-side reforms and fiscal tightening that would be neces- sary if France were to meet the Maastricht criteria. On the contrary: we can expect much less talk of stability packages and a lot more about growth packages. There will be Franco-Italian deals; those will be shameless wheezes. It will be very difficult now for the Germans to keep the Italians or the Spanish out, or to impose discipline on the French.
This will create problems for Chancellor Kohl. The French always assume that, like their own president, the German chancel- lor has quasi-dictatorial powers over for- eign policy, and Herr Kohl's manner tends to confirm that impression. But it is not true; he faces considerable obstacles.
Chancellor Kohl has never been in the habit of deferring to German public opin- ion. If! had done so in the early Eighties, he will say, I would not have deployed Cruise and Pershing; the Wall might still be standing. But his position is not impreg- nable in the Bundestag, and much weaker in the Bundesrat (senate). Then there is the Bundesbank, the keeper of the national monetary conscience. There is a parallel with the Tory party, which reacted with such hostility to Maastricht because it had allowed itself to be bulldozed into the Sin- gle Act. Some senior Bundesbank figures still regret their defeat over parity for the ostmark; this strengthens their resolve to defend the deutschmark, or at least to ensure that any euro will be a hard curren- cy. It is still politically incorrect in German official circles to express any lack of enthu- siasm for a united Europe, but those who privately feel doubts are now coalescing with the bankers to try to ensure that the criteria for the euro are set so rigidly that it could never happen. It may be that at the end of next year, the Bundesbank alone will survive the wreckage of Herr Kohl's plans, like the Rhinemaidens at the end of GOtter- dammerung, reunited with the gold.
But it would be foolish to underestimate Herr Kohl; there is as yet no countervailing force in Germany strong enough to resist his single-minded determination. The Drang nach Euro draws on the deepest political and cultural instincts of the entire German political establishment, buttressed by the passivity of German voters, many of whom feel obliged to distrust their own instincts. It is too early to predict the out- come of the Bankkrieg. One possible result would be an electoral defeat for Herr Kohl, but with the euro going ahead on schedule. In those circumstances, the Chancellor would probably retire happily, his life's work completed. Reunification and the euro would indeed be a formidable legacy.
Herr Kohl's travails could also influence British electoral prospects, albeit on a longer-term basis. The euro's problems obviously diminish the salience of Europe as a British political issue. That is good news for Kenneth Clarke, and it could be better still for Messrs Brown and Blair.
The less Europe seems likely to figure in political debate, the greater Mr Clarke's chances of becoming the Tories' leader. But he still has a problem. Even if he is denied the opportunity to commit fresh crimes, his previous convictions are on record. Moreover, though Tory MPs are not much interested either in fairness or in sympathising with John Major, some of them will note a contrast. In pursuit of his electoral ambitions, Mr Clarke is now will- ing to say things about the euro that he would not allow John Major to say in order to try to win the general election.
'Wait and see' did John Major no good; it might help Gordon Brown. In response to the euro's troubles, that phrase will no longer sound like a desperate attempt to manage the unmanageable. It will seem like a commonsense British response to all those foreigners' currency malarkeys. Not only that: until now, the assumption has been that should the euro proceed, Britain would be forced to choose between higher interest rates and devaluation, risking infla- tion. As of today, it seems more likely that the pressures would be the other way. Unless the Labour government abandoned the Tories' inflation and spending targets, the pound could well rise against a weak euro. But let us suppose that by 1999, largely due to the business cycle, the rate of economic growth was slackening; some analysts believe that it will. If so, an interest rate cut to check the pound's rise could be just the stimulus that the domestic economy needed, without any inflationary danger. Europe has killed off John Major and Alain Juppe. It may yet do the same to Jacques Chirac and Helmut Kohl; it is the most potent source of European political misfortune. Tony Blair, however, has had nothing but good luck since 1994. That will change at some stage, but there is no sign yet that Europe will be the cause.
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