At the commemoration service in Liege to mark the start of World War I, President Joachim Gauck of Germany spoke powerfully of his country’s responsibility for the war. Germany’s “completely unjustifiable” invasion of neutral Belgium showed that “treaties were worthless and that the standards of civilisation had been rendered null and void”, he said.

“Outside Germany, people were horrified by the conduct of the German troops, particularly by their treatment of civilians and their attacks on cultural heritage. The destruction of the world famous library in Leuven became a symbol that spread fear, shock and rage far and wide.”

He had another message, too.

“Europe is now governed by the strength of the law rather than by the law of the strong. The fact that small and large member states of the European Union now strive to find joint solutions and agree on joint policies in a peaceful manner in Brussels is an achievement of civilisation that cannot be overstated.”

It was a confident and worthy speech from the head of State of Europe’s most important and economically powerful country. When the Great War started a century ago, none would have foreseen the slaughter of the trenches.

Nor would they recognise today the exemplary democratic Germany that has risen from the ashes of World War II and the collapse of communism.

Yet, Germany, for all its economic strength, remains a reluctant leader of Europe. To understand why, one must understand the country’s history.

The shadows of the past weigh heavily and in complex ways, more so than in any other big country. It has no experience of exercising international leadership. The country’s two attempts at projecting power since its unification in 1871 – by imperial Germany under the Kaiser and by the Third Reich under Adolf Hitler – were unmitigated disasters.

Germany’s economic miracle after World War II happened when it was divided in two and its old capital, Berlin, was occupied by foreign armies. Until unification in 1990, West Germany sheltered under the umbrella of America’s military might with hardly any foreign policy of its own.

Its second inheritance from history is its deep-seated belief in European integration. After World War II, Europe offered West Germany a route to reconciliation, redemption and prosperity, which it followed assiduously.

In the decentralised domestic political structure imposed on Germany by the Allies, power is divided between local, State and federal government. Germans are therefore inured to federalism and view a unified Europe as the means of ensuring peace on the continent.

History’s other legacy to Germany is a craving for stability, not least because Germans have not had much of it. The seven decades since the end of World War II have been the longest continuous period of peace in central Europe for 500 years. In the last 100 years, Germany has been through two world wars, hyperinflation and several periods of economic collapse. Germans are obsessive about price stability. They attach huge importance to rules and institutions that promote stability and keep politicians in check. Guardians of stability, such as the Constitutional Court and the Central Bank, wield great influence.

The new Europe will be ‘made in Germany’ not only because of the changes it wants others to adopt but also because the future of Germany will also be made in Europe

The continuing eurozone crisis poses real challenges for Germany because it brings together a number of powerful psychological and historical forces into conflict: a reluctance to lead, a desire for European integration and a visceral fear of instability. Germany’s love of Europe is balanced by fears of instability. The one country in Europe with the capacity to lay out a strategic vision for the euro’s future seems unwilling to do so.

As a new European Commission is preparing to settle into Brussels after the European parliamentary elections, there is a fresh opportunity to address the central issue that has dogged Europe since the financial crisis broke six years ago.

Europe will only appeal to its citizens – and thus offer some legitimacy for its grand project – if there is economic growth. Above all, Europe needs to support its flawed currency by adopting a common fiscal policy. No common currency has ever survived without fiscal integration and the euro is no different.

Europe also needs to invest in its future and not remain stuck in the doldrums of austerity. If one country, Germany, grows at the expense of the others, Europe, specifically the eurozone, will not succeed. Conversely, any weak member will undermine the rest. The biggest economy, Germany, needs to consume more. It cannot continue, like China, simply working hard, exporting and saving more.

After the results of the European parliamentary elections and the impact of Eurosceptic and anti-immigrant insurgent parties across all countries, the old idea of a federal super-state has probably had its day. To reflect the democratic mood, fiscal federation means that EU government should be limited in its reach – centralising the minimum possible but maximising devolution to the member states. There can be no escaping that, ultimately, finances must be federalised. There is simply no way of escaping this reality so long as there is a single currency across such highly differentiated economic systems.

The eurozone is at a crossroads. Italy, the third biggest economy in the zone, has slipped back into recession and even Germany’s economy has faltered. France, the second biggest economy, continues to struggle. Stagnation of the eurozone economies beckons. To help heal the political rift in Europe and to stimulate growth in the southern nations, it was thought Germany would heed the Italian Prime Minister’s call for greater flexibility in interpreting the Maastricht criteria on budgetary deficits. But Berlin has rebuffed Matteo Renzi’s (and other nations’) pleas.

The German Chancellor’s handling of the euro crisis is given high marks by her countrymen because she is seen as having ‘protected’ them from the shambles elsewhere. German politicians in general, and Angela Merkel in particular, have stood by Germany’s belief that responsibility for fixing the euro lies not with them but elsewhere. The one country with the capacity to lay out – and push through – a strategic vision for the single currency’s future appears unwilling to do so.

Many Germans I know will argue that Merkel does have a vision for Europe’s economic revival, one that revolves around greater competitiveness and fiscal discipline. That Germany is capable of acting boldly and that, despite its obsession with rules, Germany is capable of acting pragmatically when needed.

Earlier this year, in May, two German teams dominated the final of Europe’s football Champions League – the first time Europe’s most important football contest was a wholly German affair. Last month, the German national team spectacularly won the World Cup.

Perhaps football is a harbinger of things that are yet to come.

The new Europe will be ‘made in Germany’ not only because of the changes it wants others to adopt but also because the future of Germany will also be made in Europe. However, a successful Europe requires a more assertive Germany. The question now, as Henry Kissinger once famously put it, is what role “a country that is too big for Europe and too small for the world” will play in the future.

For minuscule Malta, tied now so tightly to Europe, this too is a vital issue.

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