Germany is the most populous member-state in the EU and the second most populous country in Europe, after Russia. It has the largest economy and occupies the European continent’s geographic centre. Financially, it is Europe’s most potent state and economy by far.
Demographically, Germany is the most populous country in the EU with a population of over over 80m. The three next largest EU countries are the UK (65m), France (65m) and Italy (59m). By comparison, Russia’s population is around 140m. Germany sits right at the centre of the intra-European ‘demographic divide’. Eastern Europe will be experiencing a continuous decline in population levels, while Western Europe will generally speaking continue to see rising population levels. Germany is projected to see a modest population decline, even if it seems equally possible that a higher level of net migration will stabilise the population at close to current levels. A flourishing economy, high wages and economic stability should continue to attract immigrants. Germany wis set to demographic lose ground vis-à-vis France and the UK and gain ground vis-à-vis Eastern and Southern Europe. If the UK succeeds in reducing net immigration, as seems to be its overriding political objective, the UK will gain less ground than projected only a few years ago. The populations of Belarus, Ukraine and Russia will decline more or less gently, and it is very difficult to see how these dynamics could be changed fundamentally, let alone reversed given the economic and political outlook for these countries.
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| Source: IMF |
Geographically, Germany occupies the geographic centre of the EU. Historically, Germany found it difficult to manage this central position, especially security-wise. Today it is embedded in a collective defence and economic structure and is surrounded by economic and security partners to its North, East, South and West. NATO eastward expansion has effectively translated into Germany being surrounded by friendly countries. Germany has no territorial disputes with any other country. This explains in part Germany’s free-riding as far as collective defense and NATO defense expenditure are concerned.
Economically, EU eastward expansion has allowed Germany to extend its supply chains into Eastern and tap the region's well-educated workforce and integrate these countries its into industrial supply chain, while it continues to have access to the larger, more prosperous Western European and overseas markets for final demand. This has helped create an economically symbiotic relationship that benefits both Germany and Eastern Europe as far as economic growth is concerned, even if both Germany and Eastern Europe underwent painful economic restructuring. Germany has the largest economy and the largest industrial base. Germany also runs large trade surpluses with the rest of the world. Such large surpluses may be difficult to sustain, politically and economically. It also at present benefits from full employment and high living standards making it attractive for economic migrants. As Paul Krugman (1993) predicted, monetary integration has led to increased specialization within Europe and, arguably, the migration of high value-added production to the core countries.
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| Source: IMF |
Financially, Germany is the largest creditor in Europe. It runs the largest trade surpluses. It has the smallest fiscal deficit (in fact, surplus) and lowest public debt among the larger EU member countries. While large external claims might become a vulnerability in case of a EMU break-up, Germany’s public debt position is incomparably sounder than that of any other large EU economy. The combination of external creditor position and economic size, including ability to raise money domestically and internationally has effectively given Germany a veto over the future course of euro area reform. Without German participation, the euro area and EU cannot be reformed. It does not mean that Germany always gets what it wants, but wields de facto veto power allows Berlin to prevent outcomes it does not like.
Germany has also gained a fair degree of soft power (Nye 1990) in recent decades, even more so in the wake of the emergence of populist and illiberal politics in Europe, the US and elsewhere in the world. Germany’s stead-fast, if self-interested defence of a rules-based, open international order and the defense of political liberalism domestically is part of Germany’s post-WII self-image. In spite of the recent rise of a far-right party, this is not going to change. Germany today ranks among the more popular countries in the world. While it is retable how exactly this provides Germany with greater political influence, it perhaps gives certain Germany policy initiatives a greater degree of legitimacy.