13 - The Crisis Management Team (1973–1974)

Summary

Chapter 13 documents a shift in leadership as hard-nosed pragmatist Helmut Schmidt moved to the fore. The 1973 “oil shock” provoked disarray among the EC-9 as European countries adopted egoistic strategies to secure oil supplies. Bonn responded by putting the EC Regional Development Fund on hold, touching off a crisis in British–EC relations. Schmidt aligned German positions more closely with the United States, ending capital controls and embracing Henry Kissinger’s plan for Western energy cooperation. When Brandt resigned over a spy scandal, Schmidt assumed control of a confident West Germany that was managing the oil price spike smoothly – and used its influence (and a Bundesbank loan) to urge austerity measures on Italy. Schmidt forged a tight partnership with French president Valéry Giscard d’Estaing, who endorsed many German economic views. Relations with the USSR soured due to disputes over Berlin, and also because of Bonn’s key role in thwarting communist gains in Portugal and Italy. As seen in German diplomacy toward Greece and Turkey over Cyprus, Schmidt’s Germany was defining a role as a stabilizing force on the European continent in cooperation with the United States.