Promote a federalist Europe. Giscard and the French statists have not yet won with their vision of a Europe led by national prime ministers, weighted by state size. In fact, most of America's supportive European allies on Iraq and other security issues (with the notable exception of the United Kingdom) favor a federalist Europe with a strengthened executive and European Parliament, and oppose big state domination of EU decision-making. By holding out the carrot of greater recognition of the EU in international organizations (the IMF, the UN Security Council and so forth) as well as the prospect of more extensive bilateral coordination--conditional on Europe moving in a more federalist direction--the United States can support its friends in this debate.

Play to Germany's traditional postwar values. American foreign policy can benefit from a call to Germany's recent past. Since the 1950s, Germany has been committed to a federalist rather than a statist Europe. Until its most recent economic troubles gave it assistance fatigue, Germany had championed the cause of European supranational decision-making in response first to Mediterranean and then eastern enlargement. Germany also was repeatedly in consort with the United Kingdom in supporting liberalizing reforms on the Continent. If the United States appeals to Germany's sense of historic responsibility to eastern Europe, to economic efficiency in the EU, and to wanting to transcend the nation-state, it can influence German policy toward internal EU arrangements.

Encourage liberalization without sanctimony. U.S. economic performance in the 1990s and its military predominance have converged with a moralistic tone in U.S. foreign policy to make American-supported economic liberalization extremely unpopular in many places. The United States would be wiser to pick specific areas in which economic reform will serve a strategic purpose--particularly in saving Germany from stagnation--instead of being generally and promiscuously triumphalist about its superior "model." That would have the additional advantage of being more persuasive to Germans and Europeans in general since it would draw attention to the fact that there are countries doing much better than Germany (Ireland and Sweden, for example) as a result of constructive reform without converging completely on some American ideal.

In the German case, this agenda would include encouraging free international competition for pension fund and investment management, reducing agricultural subsidies and barriers, creating what amount to non-aggression pacts between rich countries of "no corporate bailouts"--rather than encouraging their escalation, as the United States did with its 2002 steel tariffs--and advancing some form of renewed international banking standards. All of these initiatives would directly or indirectly lead to greater openness, financial stability, citizen risk-taking and macroeconomic stimulus in Germany and in a more unified, less statist, European Union. That would be in everyone's interest.

Adam S. Posen is senior fellow at the Institute for International Economics. This essay is drawn from his forthcoming book, Germany in the World Economy, to be published in 2003 by IIE, supported by a major grant from the German Marshall Fund of the United States.