EU braced for pandemonium as claim Germany could follow UK out of bloc exposed

Italy would be the most likely of the “Big Four” member states to consider exiting the EU if Brexit proves to be beneficial to Britain, according to a Euronews poll. Data from the Redfield and Wilton Strategies survey found that nearly half of Italians would be likely to support their country leaving the EU if the UK and its economy is in good health in five years. In the event, France and Spain both showed moderate support for changing their relationship with the bloc, while Germany was the member state least likely of the four major players to consider breaking away from Brussels.

However, as the bloc tries to recover from years of fraught Brexit negotiations, a gloomy report by the President of DIW Berlin, one of the leading economic research institutes and think tanks in Europe, has resurfaced.

Last year, Marcel Fratzscher, Professor of Macroeconomics and Finance at Humboldt-University Berlin, explained why a “Dexit” is actually not that unlikely.

Professor Fratzscher admitted the stated aim of the far-right Alternative for Germany (AfD) party of achieving a German exit within five years seemed absurd.

However, he added: “A ‘Dexit’ and even a collapse of the European Union is not as unlikely, especially if Germany does not learn the right lessons from Brexit.

“Hardly anyone thought Brexit was possible five years ago.

“Great Britain has benefited greatly from its EU membership.

“It had prevented a collapse of the British industry and the decline of agriculture in the Seventies and Eighties. Only through EU membership could the City of London become Europe’s only global financial centre.

“Hardly any other country has benefited economically as much from immigration from the EU as Great Britain.

“Despite these many advantages, Britain has never really been able to identify with Europe.”

Prof Fratzscher claimed “many in politics and society” in Britain were “under the illusion that the country was a world power and that it did not not need Europe for its prosperity and future security”.

Many in Germany, he wrote, are subject to similar illusions.

He added: “Germany as the largest and economically strongest country does not need Europe, because the economic future lies in Asia, and political decisions are made primarily in the US and now in China.

“They chant that Europe is a transfer union in which we are paymasters and that it harms our interests. Thus, some people in politics, in science and some in the media have managed to persuade the Germans that the rescue of Greece and other countries or the payment system Target had brought losses for Germany.

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“The exact opposite is the case: the German taxpayer did not have to suffer losses for these programmes or the payment system, but German banks and German investors were protected by these programmes, and thus ultimately also the German taxpayer.”

The economist noted Germany’s “economic boom” over the course of the last decade would not have been possible without large-scale immigration.

Germany was guilty of pursuing an economic policy, which led to large trade deficits and which required high deficits and debts in other countries.

He explained: “Germany has become a blocker of important European reforms and too often pursues a European policy of saying ‘no’.

“Similar to the British, Germans should realise that our country is small from a global perspective, but at the same time our wealth depends on a strong, unified Europe, more so than other countries, especially because Germany and Europe are losing geopolitical and economic importance.

“This is becoming increasingly obvious, for example in the trade dispute with the United States.”

Prof Fratzscher concluded in his piece for the website of the German Institute for Economic Research (DIW): “Germany must fundamentally change its European policy and, together with France, promote the wise integration of Europe.

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“This requires courageous reforms of the euro and a strengthening of European institutions and public goods, as in security and social policy.

“And yes, it also requires that the federal government raise money for a common budget to fight the crisis and make wise investments in the future of Europe, and thus also Germany.”

Since the German economist wrote his column, Berlin seems to have made a lot of progress in that regard.

At the end of summer, EU leaders, spearheaded by German Chancellor Angela Merkel and French President Emmanuel Macron, struck a deal on a huge coronavirus recovery package after days of bitter talks.

The €750billion (£668billion) coronavirus fund will be used as loans and grants to the countries hit hardest by the virus.

The remaining money represents the EU budget for the next seven years.

German Finance Minister Olaf Scholz described the deal as the bloc’s first step towards a fiscal union.

Mr Scholz told an interparliamentary conference on stability, economic coordination and governance in Brussels: “We are moving towards fiscal union, a major step forward in the financial capacity and sovereignty of the EU.”

He added: “Markets have confidence in European policies and in the development of European economies.

“We should carry on with this course.”

Prof Fratzscher is not the only one to have raised the prospect of a German exit, though.

In a 2018 debate at the Oxford Union, former Greek Finance minister Yanis Varoufakis claimed the eurozone will not break up because of countries like Italy or Greece but because of Germany.

The ex-Greek minister explained: “The euro will break up, if it breaks up, I am not wishing that it does, I am simply describing the future as I see it.

“The way it will happen is that Germany will leave the euro once the Berlin political class has had enough of the riff raff, asking Greeks, the Italians, the French, the Portuguese and so on.

“The moment they start sniffing in the wind that possibility they might have to bail out 2.7 trillion euros of Italian debt, believe you me, the Bundesbank already has a plan in the drawer for printing Deutsche Marks.”

Mr Varoufakis said all German accounts will be redenominated from euros to Deutsche Marks immediately, as Germany has a “gigantic account surplus”.

He added: “The nearer we are getting to a fragmentation of the euro, the higher of the value of the German euro is.

“Of course what will happen is euros will be shifted from Italian bank accounts to German bank accounts.

“This is already happening.

“There are about 200 billion in the last 18 months that have shifted from Italian to German bank accounts because of the risk of keeping your euros in a country that after the break-up of the eurozone will see its currency redenominated downwards not outwards.”