An article titled “Germany in the Crosshairs?” by Alan Cafruny, the Henry Platt Bristol Professor of International Affairs, was published by the Valdai Discussion Club on Feb. 20.
Cafruny wrote that he thinks President Donald Trump’s foreign policy team “is unlikely to overturn the basic structure of U.S. alliances in Europe and Asia.” It is the President’s foreign economic policy that Cafruny thinks will be more consequential.
“It will almost certainly view trade relations as a zero-sum game that is won through the use of coercive economic diplomacy,” Cafruny said. “Germany lies directly in the crosshairs and it is uniquely vulnerable.”
According to Cafruny, “The key problem for the Eurozone as a whole is uneven development. No longer able to devalue, and subject to a Commission-enforced fiscal straitjacket under Berlin’s watchful eye, the southern member states of the Eurozone are condemned to ‘internal devaluation’ and prolonged stagnation with no end in sight.
“The neoliberal aspects of the NAFTA, TPP, and TTIP that have provoked popular opposition are likely to be preserved—and perhaps even enhanced—in new trade agreements, in line with coming U.S. domestic deregulation and corporate tax cuts [under the Trump administration],” Cafruny contends.
“Many administration proposals, including the border adjustment tax, could violate WTO (World Trade Organization) rules and provoke retaliation, including from the EU,” he added.
While other countries with a high percentage of their exports coming into the U.S. will likely make concessions, Cafruny said Germany is in a more precarious situation. “A breakup of the Eurozone, much less the single market, would be catastrophic.”
“Many observers have called on Germany to take the lead in constructing- and underwriting - a genuine European fiscal union,” Cafruny continued. “If the Eurozone—much less the EU—is to be saved it may be necessary for the Federal Republic to summon the political will to carry it out,” he concluded.