David Cameron needs Angela Merkel, but she relies on him too

The red carpet will be rolled out for the German Chancellor's visit this week; the two European leaders have a lot they could learn from each other

Share

We are, quite rightly, rolling out the red carpet for Angela Merkel this week – for not just a day of bonding with David Cameron but an address to the joint Houses of Parliament, no less. The aim of the visit from our point of view will be to get German support for European Union reform, or at least to establish where there is common ground between us. The aim from the German point of view is to help Britain stay in the EU.

That is over-simplifying of course, but you see the point. Germany is the great economic anchor of the eurozone, but as Angela Merkel herself noted in a speech last year, Germany's strength is not infinite. The country needs successful neighbours, and while Britain is third to France and the United States as a destination for German exports, it is the largest export market for the eurozone as a whole. By contrast, for the first time since the 1970s we are now exporting more to non-European countries than we are to Europe. Nevertheless, we too need a successful Europe and the key to that is Germany.

Beyond this obvious common interest, there is something else. Germany and the UK have the strongest job markets in Europe. In terms of economic growth the UK is at last starting to outpace Germany, but for the past three years the UK and Germany have been the only significant sources of new jobs in Europe. We are similarly competing for top talent; Germany eased its regulations on highly skilled workers from outside the EU some 18 months ago, and earlier this month Cameron announced modified visa requirements for people with "exceptional talent". This takes effect in April.

One of the fascinating things that has happened in the EU over the past five years is that we have moved some way towards a single market in labour. People move between countries for jobs in a way that would have been almost unthinkable 10 years ago. We see that in the UK, where roughly one in three of the jobs created over the past year goes to people born elsewhere.

Germany is the second-largest destination for EU migrants. If the magnet of opportunity is attracting people to the stronger economies, the lack of opportunity is expelling people from countries such as Italy and Spain. Italian emigration was 68,000 in 2012 (we don't yet have figures for 2013), while Spain is projected to lose more than 200,000 a year for the next decade. Of course, not all the people leaving southern Europe are highly skilled, but the figures contain an alarming statistic for Italy. One-quarter of the people leaving the country have degrees.

A true single European market for labour does not yet exist because there are all sorts of frictions, including language, professional qualifications, and so on. But we have enough of one now to see what sort of EU we are moving towards. It is a world of winners and losers. There are three main features to this.

First, the weight of the European economy is shifting from the periphery to the core. The general movement is north – away from the Mediterranean – but it is not as simple as that, for within the UK the move is to London and the South-east.

Populations are moving, creating greater physical pressure on the winning areas, in infrastructure, housing and so on. We are very aware of that in London and one of the great challenges for the UK will be how to cope with that in a decent and socially acceptable way. We are less aware of the consequences of depopulation. To see that, you need to go to the half-built housing estates in Ireland and Spain.

Second, this is a Europe for the highly skilled. They are mobile and they are moving. That puts more pressure on governments to improve the skills of their workforce, but this is an achingly slow process. Even Germany, with its system of technical education developed over several generations, is struggling to fill skill gaps. A Europe that works for the skilled but not for the less-skilled may be an inevitable outcome of global economic change, but it is not one that its citizens will easily accept, particularly since the European welfare model is unsustainable. As Merkel noted, Europe's problem is that it accounts for 7 per cent of the world's people, 25 per cent of its GDP and 50 per cent of its social spending.

That leads to the third winner/loser distinction, less obvious right now but potentially the most corrosive of all: could it be that Europe as a whole will be a loser? It is inevitable that its economic weight in the world will tend to shrink, but it should be possible, despite the headwind of ageing populations, to go on increasing the living standards of most of its citizens. But you can't do that with the levels of unemployment prevalent in much of the eurozone. Were the idea that Europe is a loser to take hold, then … well, let's not go there just yet.

It is however this Europe of winners and losers that Cameron and Merkel have to confront. They represent the two most successful large economies of the region, both with rather different problems, but both with great opportunities.

I suggest that the cautious, thoughtful Chancellor has much to teach the intuitive, intelligent Prime Minister, but maybe something to learn too.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

C# Developer (C#, ASP.NET Developer, SQL, MVC, WPF, Real-Time F

£40000 - £48000 per annum + benefits+bonus+package: Harrington Starr: C# Devel...

C# Swift Payment Developer (C#, ASP.NET, .NET, MVC, Authorize.N

£45000 - £60000 per annum + benefits+bonus+package: Harrington Starr: C# Swift...

Front-End Developer (JavaScript, HTML5, CSS3, C#, GUI)

£55000 - £70000 per annum + Benefits + Bonus: Harrington Starr: Front-End Deve...

Graduate C# Developer (.NET, WPF, SQL, Agile, C++) - London

£30000 - £40000 per annum + Benefits + Bonus: Harrington Starr: Graduate C# De...

Day In a Page

Read Next
Would you fork out to spend time on Sting's Tuscan estate?  

Happy to pay for the privilege of picking olives? Then Sting might have a job for you...

John Walsh
Clockwise from top: Zafran Ramzan, Razwan Razaq (main picture), Adil Hussain, Umar Razaq and Mohsin Khan were sentenced for grooming teenage girls for sex in 2010.  

Nothing can make up for the trauma of Rotherham's abused young girls, but many more heads must roll

Jane Merrick
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone
Amazon is buying Twitch for £600m - but why do people want to watch others playing Xbox?

What is the appeal of Twitch?

Amazon is buying the video-game-themed online streaming site for £600m - but why do people want to watch others playing Xbox?
Tip-tapping typewriters, ripe pongs and slides in the office: Bosses are inventing surprising ways of making us work harder

How bosses are making us work harder

As it is revealed that one newspaper office pumps out the sound of typewriters to increase productivity, Gillian Orr explores the other devices designed to motivate staff
Manufacturers are struggling to keep up with the resurgence in vinyl records

Hard pressed: Resurgence in vinyl records

As the resurgence in vinyl records continues, manufacturers and their outdated machinery are struggling to keep up with the demand
Tony Jordan: 'I turned down the chance to research Charles Dickens for a TV series nine times ... then I found a kindred spirit'

A tale of two writers

Offered the chance to research Charles Dickens for a TV series, Tony Jordan turned it down. Nine times. The man behind EastEnders and Life on Mars didn’t feel right for the job. Finally, he gave in - and found an unexpected kindred spirit
Could a later start to the school day be the most useful educational reform of all?

Should pupils get a lie in?

Doctors want a later start to the school day so that pupils can sleep later. Not because teenagers are lazy, explains Simon Usborne - it's all down to their circadian rhythms
Prepare for Jewish jokes – as Jewish comedians get their own festival

Prepare for Jewish jokes...

... as Jewish comedians get their own festival
SJ Watson: 'I still can't quite believe that Before I Go to Sleep started in my head'

A dream come true for SJ Watson

Watson was working part time in the NHS when his debut novel, Before I Go to Sleep, became a bestseller. Now it's a Hollywood movie, too. Here he recalls the whirlwind journey from children’s ward to A-list film set
10 best cycling bags for commuters

10 best cycling bags for commuters

Gear up for next week’s National Cycle to Work day with one of these practical backpacks and messenger bags
Paul Scholes: Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United

Paul Scholes column

Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United
Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

Kate Bush shows a voice untroubled by time

A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
Robot sheepdog technology could be used to save people from burning buildings

The science of herding is cracked

Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

This tyrant doesn’t rule

It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?