So in other words, Germany interprets EU rules in the manner that best suits their own interests. As does France, and as should we. That's not, imo, an argument for getting out - that's an argument for
ensuring that our own govt gets the best possible value out of our continued membership. And for continuing to act collectively with our European partners when striking trade deals with the rest of the world. Because a Europe acting collectively has far more clout than several countries acting individualy.
It is a power struggle. The KfW came into being as a mechanism to help Germany rebuild and restructure after the war. It is now an instrument for creative accounting and the Germans use it to make their national debt look superb when in fact it is just as bad as the rest of Europe (excluding Greece.)
When the EU idea started (EEC) the French were the powerful ones. The common agricultural Policy (CAP) was over 70% of the EU expenditure even up to 1980. It was initially basically a trade off between France and Germany. Germany would get access
France were the biggest recipient by a long margin and it was basically an exchange between Germany and France where in return for Germany having access to the French market to sell their industry they would pay the French farmers. France are still the largest recipients receiving 17% of the total CAP which accounts these days for just under 40% of total EU expenditure.
Problem is that since the Common market turned into the EEC turned into the EU the idea has changed without rethinking the original plan. Each treaty change is just a rehash of the old rules to try and make the new aims appear achievable however when each country tries to cling onto the part that they want without assessing the whole package then it fails each time.
For example where the original treaty was a tit for tat between France and Germany with some appeasement thrown in for the other 4 (Belgium, Italy, Luxembourg and the Netherlands) also remember at this time Germany was still split so we are talking a deal between West Germany and France. Germany could sell their stuff in return for West German support for France's farmers.
Since then the EU has had to continue with this initial policy even though it is pretty much unfit for purpose now as there are so many more countries in there and while France still gets the biggest percentage of the CAP they are now net contributors. Germany has become one since then and is now a much bigger beast. All the other countries qualify for a share of that agricultural pie so what was once a tit for tat deal is now a noose around France's neck. France's farmers may get 3x the amount British farmers do but many are very near to bankruptcy.
What used to feed the French economy is now basically a rebate from France's contributions and while France teeters on the brink of bankruptcy with debt being over 97% of GDP it is in effect funding the poorer countries of Europe. France's weakening has meant Germany has even more power.
Compare the defecit to GDP ratio of the big 3:
France 97.22%
UK 82.86%
Germany 73.43% (probably closer to 90% when you add in the KfW bank's (honestly not) national debt.
The UK's debt to deficit GDP ratio is actually fairly normal, much better than France, and likely better than Germany. 1.5 trillion is a scary amount but our GDP is 1.8 trillion. There are countries that are considered poor but getting a lot of EU money like Latvia that only have a deficit to GDP ratio of 36% and Poland 51%. They are borrowing less than us because we are funding them. If we didn't fund them they would most likely have deficits similar to the big 3.
To bring things into perspective the USA is 106.3% and Japan is 217.21% Only China has a lower deficit to GDP ratio than us out of the top 6 economies.
The problem is that while the rules are the same for every country they are applied and enforced differently not just by Germany and France but also by the EU Commission. Germany made rules on maximum deficits to implement automatic sanctions for transgressors way back because everybody should be sensible and practical like them and who were the first to break the rules? Germany and France and what happened? The EU decided not to do anything to Germany and France. They didn't make the same decision for Greece though. Wonder why?
More on KfW and the German way within the EU can be found here. Would take a lot more typing for me and this is already a long post:
The fiscal role of the KfW:
http://bilbo.economicoutlook.net/blog/?p=26324
Germany’s serial breaches of Eurozone rules:
http://bilbo.economicoutlook.net/blog/?p=30887
So in short yes France and Germany do flout the rules. Germany thinks it runs Europe and France's only leverage is that it will vote against the Germans if it doesn't get its own way. Germany wanted to hit Greece harder, France want Germany to write off some of the debt. What you see in Greece is actually a compromise. The other countries don't have much say at all. If they want the money then they have to agree with what Germany (with French agreement) says.
One example is the refugee crisis. Merkel made a statement that all refugees were welcome in Europe as if she were the EU spokesperson and it had all been agreed when of course it hadn't. You then had the EU announce they would agree quotas for each country and a lot of nations said No. Less than a week later the Nos were addressed. EU grants are leverage and the Germans threaten with that leverage. You also have to remember that 5 countries are cap in hand to the EU because of bailouts. Portugal's president even denied a coalition that formed after Portugal's last election the right to govern because they would be a threat to the austerity demanded by the Germans via the EU. So the motion was passed and quotas forced on those who are net receivers from the EU. What Germany says goes after they have got France to agree.
While at the moment the UK has said that we will not take a quota mandated from the EU and we will take what we want on our terms we have heard that before. Cameron and Osborne proudly announced that we would not be contributing to bailouts.......but we did. Cameron vehemently stated we would not be giving the EU the extra 2bn when our economy came out of the recession much better than the rest of the EU........but we did. A lot of words but for all the money we put in we don't have the balls to fight the ECJ over implementation or no implementation of EU rules and directives. We just apply them. I fully expect that the vote for prisoners issue will be back on the table if we vote to remain.
