The special relationship between Germany and Israel

The future of German-Israeli relations

Today, more than 40 years after taking up diplomatic relations and over 60 years after the end of the Shoah and World War II, Israel and Germany are connected to each other through a tightly knit network of political, economic, academic, cultural and, not least, personal relations. It is often pointed out that, after the United States, Germany is Israel's more important ally.

This is the positive result of a difficult and painful process, one that has had its share of ups and downs, not to mention crises. In recent years in particular, relations have been greatly impacted by changes on the German side that can be ascribed to three influences: the conflict in the Middle East, renewed efforts to look at Germany's past and the increasing influence of the European framework on German foreign policy.

The conflict between Israelis and Palestinians, made all the more difficult by the beginning of the second Intifada, led in recent years to a wave of disapproval of Israel and its policies among Europeans and to verbal and physical assaults on Jewish citizens living there. Only with Israel's withdrawal from Gaza and the northern West Bank, moves that met with international acclaim, was there a noticeable turnaround in public opinion and media reports.

As part of the gradual development of a common foreign and security policy and a European security and defense policy, more and more responsibility for determining foreign policy is being shifted from Berlin to Brussels. Increasingly in the future, Germany could potentially face the dilemma of having to decide between its own traditionally Israel-friendly stance and support for the European consensus.

The special, unique relationship between Germany and Israel is based on commemorating the murder of Europe's Jews. A number of factors are leading to new methods and impetus for remembrance: the fading presence of World War II, the end of the Cold War, Germany's reunification, and the disappearance of those who experienced past events directly.

At the same time, intensive debate has recently ensued in individual nations in Central and Eastern Europe on their own pasts and their relations to their Jewish minorities. There is now increased awareness that anti-Semitism and the Holocaust had a European dimension from the start, which in no way diminishes Germany's role and responsibility for the genocide of Europe's Jews. An awareness of history acts both as a normative element in the creation of national identity and as a factor determining domestic and foreign policies. This is a truth that could in the future apply at the European level as well.

In this situation, it is essential for the stability of German-Israeli relations to identify mutual interests that transcend history and memory and which can provide a robust basis for the future. These include strategic partnerships in the areas of foreign and security policy and in economic relations.

Geo-strategic interests and goals

In recent years, the Middle East has become a key political focal point for the globe's international actors. Its restructuring, transformation and, above all, its stabilization stand high on the international policy agenda.

One consequence of the war in Iraq is that the region's balance of power has fundamentally shifted. Other conflicts are also having an impact far beyond the region's borders: the Israeli-Palestinian conflict; the ongoing disagreements about borders and spheres of influence in the Gulf region; the possible spread of weapons of mass destruction, in particular in conjunction with Iran's nuclear program; and the religious charge now being added to existing strife.

Following the terrorist attacks on Sept. 11, 2001, the United States began looking at the politically retrograde regimes in the Arab and Moslem world as the source of terrorist activities. Since then, an intense debate has commenced over how the region can be restructured and modernized both politically and economically, a debate that has dominated public discourse and attitudes among policymakers particularly in the United States and Europe.

The US policy carried out in a number of guises ("Broader Middle East Initiative") to foster - from outside the region if necessary - democracy as a way of precipitating social transformation and to facilitate regime change using military means in Afghanistan and Iraq has not proven successful and has opened the door to even greater risks.

Yet after 10 years of effort, an assessment of the European-Mediterranean partnership, which is pursuing its own comprehensive multilateral and cooperative efforts, is also sobering. Neither has it enabled the implementation of a regional security framework, nor has it led as hoped to a wide-scale process of political reform in the partner states.

A number of fundamental objectives and interests in and around the region exist. They include interests related to security policy, above all those relating to threats from terrorism and from the spread of weapons of mass destruction; a fundamental interest, especially from the German perspective, in the security of the state of Israel; and economic interests, including a secure energy supply.

A number of factors are required in order to achieve these goals and address these interests. They include support for political, economic and social reform in the region's states, expanded possibilities for regulating the conflict between Israelis and Palestinians, cooperative measures in the fight against Islamicist-inspired terrorism both within and outside the region, and the establishment of regional security structures.

These tasks can only be fulfilled through the cooperation of all actors involved. Reforms and initiatives undertaken in the West alone will not prove successful in the region.

Economic cooperation

Israel has successfully come through the recession that lasted from 2001 to 2003. The macroeconomic fundamentals of the past two years show the relative strength of the Israeli economy: Thanks to moderate inflation, an annual increase in GDP of approximately 5 percent, a successful fiscal policy and tax incentives, the Israeli economy is benefiting from stable overall growth.

Two elements have been key factors in this favorable development: a continued high  level of exports, which is based primarily on high-tech goods, and a record level of foreign investment ($9.7 billion in 2005). Israeli companies have become world market leaders in a number of sectors, including genetic and biotechnology, material research and information and communications technology.

Germany is Israeli's second most important trading partner. In 2005, Israel exported $1.3 billion and imported $2.9 billion worth of goods to and from Germany, respectively. Regionally, the EU is Israel's most valuable trading partner. In 2005, Israel received 37 percent of its overall imports from the EU, compared with 15 percent from the United States. In terms of exports, 34 percent were shipped to the EU and 28 percent to the United States.

With the expansion of the EU to the east, Germany now stands at the center of Europe, and a number of Israeli companies have set their sights on it. Numerous Israeli businesses, especially in the high-tech sector, have chosen Germany to serve as their base for marketing, sales and logistics. The volume of Israeli investment in Germany far exceeds that of German investment in Israel.

In terms of winning the favor of foreign capital investors, Israel's businesses have become one of the globe's most successful players. Financial flows take the form of both direct and portfolio investments. Above all, the massive influx has made a rapid expansion in the high-tech sector possible and noticeably promoted economic growth throughout the entire country. At the same time, however, the high level of tactical investing means that future developments are not only dependent on the country's performance and technological ability, but also to a high degree on the overall trends impacting international stock markets. 

Stable conditions are a critical prerequisite for long-term economic growth. Investors watch regional geopolitical developments with great attentiveness. The foreign businesses and corporations that grew uneasy during the second Intifada must now be reassured. The growth of the Israeli economy will therefore depend on whether or not the nation's internal and external security needs are successfully met.

Healthy economic conditions are also an essential precondition for long-term peace between Israelis and Palestinians, as well as for peace in the region. Until now, not enough attention has been paid to this aspect of the peace process, especially within the Israeli-Palestinian context. The Palestinian economy must again reach a level of being able to ensure employment and prosperity and reduce poverty. Only an open and growing Palestinian economy can create the conditions for sustainable peace.

The private sector must become the locomotive for economic growth and development. Israel, the Palestinian Authority and the international community all bear a key responsibility for supporting the private sector by creating the necessary conditions.