Stop lecturing Germany, Gordon. Steinbrück is right

Gordon Brown would prefer Europe not to exist. If he had his way, politics would be played out in Britain, the transatlantic relationship and - his current unfortunate conceit - the world. These are the chosen stages, real or delusional, on which our prime minister moves with assurance and a politically dangerous degree of hubris.

Europe, for him, is a sideshow by comparison, a distraction and worse, because in his mind it brings only penalties, not rewards. Not only would Brown prefer not to think about Europe; he would also prefer us to pretend that he does not think about it.

Yet think about it he must. The events of the week remind both us and him of the extent to which this Europe-free vision is a piece of political escapism. As the economic crisis begins to settle into a way of life rather than an adrenalin rush, Europe is emerging through the fog as the international forum in which Britain's economic fate - and Brown's political fate - will be most decisively shaped in 2009. With the pound falling to parity with the euro and an emerging strategic division between Britain and Germany, the events that matter are Brown's Merkel-less talks with Barroso and Sarkozy in Downing Street, yesterday's economic summit in Brussels and the climate change talks in Poznan. Compared with these, the rest is grandstanding.

These are defining times not just for Europe's economies but also for the shape, if any, of the European project that the next generation will inherit. This is fact, not opinion. Regardless of whether they are members of the eurozone or even of the EU, the simple reality is that unless Europe's national economies coordinate their responses to the global downturn, they risk inflicting serious collective self-harm. The degree of Europe's economic, political and legal integration is now so great, the mutual dependence as trade partners so profound, and the collective European share of the global economy so large, that European agreement is as vital in the current emergency as disagreement would be destructive.

This is the far-from-ideal context in which events such as this week's serious divisions with Germany, and the prospective second Irish referendum, should be understood. We live in the Europe we have made for ourselves, not in the Europe that we would like (or, in Brown's case, would not like) to inhabit. Midway through his life-enhancing West End stand-up show about the history of everything, Eddie Izzard says something that illuminates why this matters. He tells his audience that human beings never really needed the Ten Commandments in the first place. Actually, we only needed one commandment - to do as you would be done by; and perhaps a second - to remember that what goes around comes around.

The controversial Newsweek interview with the German finance minister Peer Steinbrück exemplifies how, in politics, what goes around always comes around. In the interview, Steinbrück laments the "breathtaking" policy switch that some governments, including Brown's, have made "from decades of supply-side politics all the way to a crass Keynesianism". His exasperation calls to mind the old Communist jibe against errant comrades who were only ever on the party line while they were crossing it from right to left and back again. What is needed instead is "a little steadiness and continuity", says the man who is, lest we forget and, pace Alistair Darling, the single most important finance minister in Europe.

Ordinarily that would be right and, even in today's circumstances, Steinbrück has a point. After all, it's not the German economic and social model that has suddenly come apart at the seams, but ours. I'm aware that those of us who like and admire Germany need to be specially vigilant to also bear witness to Germany's failings and limitations - which not only exist but have been inadequately addressed by successive German governments. Nevertheless, Germans have not run up the unsustainable levels of personal debt that the British have. Germans have not financed their wealth on a house-price bubble and cheap lending, as we have. Germans save their money and they base their economy on industrial manufacturing and exports, in which we lag behind. Not surprisingly, it is to German taxpayers that Europe's more feckless governments, like Italy, are now turning to bail them out of their difficulties.

And when Brown and the other critics point to Germany's much higher level of structural unemployment than ours, with the implication that Britain has been more dynamic in getting its citizens off welfare and into work, let them also remember that only Germany has had to absorb an economically shattered country - the old East Germany - into its borders. If Britain had been faced with 16 million new East British citizens over the past 20 years, the Brown boom might not have been as large as it was, or have lasted as long as it did.

Steinbrück is even right to suggest that some of the apocalyptic talk may be exaggerated and to imply that politicians like Brown are pandering to a yearning for a "Great Rescue Plan". His social democrat colleague Gesine Schwan is also right, in a fascinating piece on Comment is Free this week, that balanced budgets matter and that the state can easily stifle as well as protect. Yet Steinbrück and Schwan must also accept both that fiscal expansion is the crucial, perhaps the only, weapon in governments' hands right now and that, on the European level, fiscal expansion that is not coordinated is likely to fail.

It must be hard for Germans to take lectures from Brown. For more than 11 years he has descended on continental Europe for brief visits - always luridly well-trailed in the Daily Mail and the Sun - in which he has lost no opportunity to lecture Germany from the free-market right about the shortcomings of its social market economic model. Now, with no word of apology, he is lecturing them again, this time from the diametrically opposite statist left. Not surprisingly, the Germans don't like it.

Yet the times will not tolerate the trading of insults. They demand the trading of goods and of money. That is why Brown, for all his autocratic ways, is more wrong than right and why Steinbrück, for all his wise caveats, is the opposite. Nothing in European politics is ever ideal, but both in this crisis and in the development of whatever EU emerges from it, it would be far better for Britain and Germany to learn to work together, not against each other.

Martin Kettle