The nation at the heart of the EU needs allies – it might be more amenable to revised membership terms for the UK than it admits
Last week's EU summit offered a glimpse of what the future could hold for Germany in an EU without the UK. With David Cameron coming under pressure to offer a referendum on the EU – whatever the precise question – Britain leaving altogether is no longer as remote a prospect as it once seemed. One of the biggest losers from a UK exit would be Germany, whose list of natural allies in Europe – and in the eurozone – would then look awfully thin. Berlin therefore has a huge incentive to make sure the UK remains inside the EU tent, even if that means accepting Britain getting a new deal in Europe.
As the eurozone moves towards closer fiscal union, the UK public is becoming increasingly frustrated with its terms of membership, and these will very likely need to be revised if the UK is to remain inside in the long term. At the same time, Germany is in the unenviable position of both being expected to take the lead on saving the euro and becoming increasingly resented for doing so. At last week's summit, the chancellor, Angela Merkel, found herself fighting a rearguard battle against the co-ordinated efforts of France, Italy and Spain, who managed to force some concessions over the more flexible use of the bailout funds.
Merkel's ambush at the hands of this "club Med" bloc is an early warning of what Germany can expect to see much more of as the eurozone integrates further, with non-euro countries such as Sweden, Denmark and Poland forming a separate core, and with Britain possibly out altogether. While the UK fears being outvoted by a eurozone bloc within the EU, Germany has the same issue within the eurozone. Proportionally, Germany has far fewer friends inside the eurozone than in the EU as a whole, with the bloc's centre of gravity skewed by the more protectionist and high-spending southern states. The decision of the French president, François Hollande, to reverse parts of Nicolas Sarkozy's pension changes is indicative of this divide in economic thinking.
Therefore, Germany has a very strong interest in keeping as many decisions as possible at the level of 27 member states. As Die Welt's columnist Alan Posener wrote, many European politicians are "trying to make the eurozone into an alternative system to Anglo-Saxon capitalism, a system of 'regulation and solidarity' without Great Britain but with Greece, Italy, Spain and the France of François Hollande … Great Britain is needed in Europe so that this nightmare does not come to pass".
While the two countries do certainly not see eye to eye on everything, the Anglo-German alliance has often worked well in the past, for example in defeating concerted attempts by Spain, Greece and Portugal, as well as the European parliament, to scrap the opt-out from the EU's 48-hour week enjoyed by the UK and others. Both countries have also adopted a common position on freezing the EU's next long-term budget, and there is still ample scope for more detailed co-operation on reforming the economically irrational farm subsidies or the so-called structural funds. In general, Germany needs Britain to uphold a rules-based internal market as Europe goes through a potentially highly defensive phase.
This means that, if push comes to shove, the Germans may prove more susceptible to UK arguments for revised membership terms than it is willing to admit publicly. A common response from EU-reform sceptics to any suggestion that the UK should seek a more flexible relationship with Europe is that other member states would never allow it, but this has never been credibly tested. Politics often comes down to being able to find the least worst compromise. It won't be easy, but arguably, the Germans have more to fear from being left isolated within the eurozone than they do from a new bargain with Britain. If the choice is between the UK leaving or getting some EU powers back, Berlin may – after a lot of posturing, negotiation and bickering – go for the latter for fear of being left bowling alone in Europe. That is to say, that Britain has more leverage in Europe than it may think. Germany needs Britain and vice versa. No one likes being without friends.
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