2018 Outlook

Impatiently waiting, EU is ready for Germany's new government

Pulse Of Europe Gatherings Spread To More Cities
Staying strong. Source: Getty Images

Shortly before Christmas, German Chancellor Angela Merkel made an important promise. By March this year at the latest, Germany and France will have talked about the future of the European currency union. “The will is there,” Ms. Merkel said. “And that is the deciding factor.”

That willingness that the chancellor promises is easily discernible – but only on one side of the Rhine. French President Emmanuel Macron wants European nations to come closer and form a strong leadership of their own. But how Ms. Merkel feels about this, we still don’t know – and that’s after 12 years in power. This is due to her driving style when it comes to Europe: Accelerate a little, brake a little, head a little bit further down the road but never, ever name your final destination.

On March 30, 2013, Ms. Merkel was advocating for a “solidarity mechanism” for the euro zone and a full-time president for the euro group. At least that was according to a joint statement she made with France’s president at the time, François Hollande. But later Ms. Merkel quietly sidelined that statement, effectively halting France’s pan-European political ambitions. In June 2015, Ms. Merkel and Mr. Hollande would only go so far as to say they planned a further joint statement about the euro zone’s future by the end of 2016. But nothing came of that.

European heads of state meet one another as frequently now as if there was an emergency, yet another indication of difficult circumstances.

Now there’s a new date being set. But again there are doubts as to how seriously it will be taken. The chancellor cannot possibly negotiate with France on this topic when the policy positions held by her own party, the Christian Democratic Union, and its Bavarian sister party, the Christian Social Union, are so far from those being pushed by their likely coalition partner, the Social Democratic Party. Leading members of the latter, Martin Schulz and Sigmar Gabriel, are pushing for a united Europe, and even harder than Mr. Macron. Meanwhile the Christian Democrats are clinging to the idea of national sovereignty. What Ms. Merkel wants personally, is still unclear.

But in the 28-page document released by the SPD and CDU, several sections highlighted working in close partnership with France and reforming the euro zone. It seems for the sake of establishing a government, both Ms. Merkel and Mr. Schulz agree about promoting fiscal control, economic coordination across the euro zone, and fighting tax fraud and tax avoidance.

Right now, there is no acute crisis to deal with. Nonetheless, Europe is under enormous pressure. The Brexit situation is far from resolved. The currency union is not fully equipped to deal with future financial problems. Scrapping over the obligatory refugee quota could turn nasty again any moment. And Poland and Hungary are busily eroding fundamental democratic values while the Russian hegemon harasses Europe both inside and out. Russian President Vladimir Putin supports anti-EU populist groups like France’s National Front inside the union and at the same time – just like China – he is entrapping countries in close proximity to the EU, such as Albania and Serbia. This is forcing the EU to consider, once again, if or how they should offer those countries the possibility of some kind of EU membership, something that has been extremely unpopular. This May, heads of government will debate this in Sofia, Bulgaria.

23 p11 Euro zone-01

This is one of seven EU summits planned by Donald Tusk, president of the European Council, in 2018. But if past experience is anything to go by, there could well be more. The heads of state meet one another as frequently as there are emergencies. This is yet another example of the difficult circumstances in which the EU continues to find itself.

Things will really kick off in February when the politicians meet to discuss the fundamentals of EU finance over the next decade. Will the EU decrease agricultural subsidiaries and increase spending on exterior borders and defense? Will the euro zone get its own budget? Will funding to Hungary and Poland be cut because those governments are refusing to take refugees, and because they are undermining the separation of powers essential to any democracy? How will the EU fill the hole in the budget that Brexit is tearing open?

Mr. Macron has already put his stake in the ground when it comes to this important debate, which will decide the future of the EU. In his speech at Paris’ Sorbonne University in September, he suggested reforming the very expensive policies around agriculture. In doing so, he broke a longstanding French political taboo. Ms. Merkel isn’t bringing anything nearly as radical. In fact, despite progress made by the party heads in laying out conditions for a Grand Coalition, it is unclear what she will bring to the table because her new government may still be establishing itself come February.

Things will carry on in the EU. In June, there are crucial decisions to be made: how the currency union should be reformed, including conditions of a deposit guarantee scheme, and how asylum rights in the EU can be brought up to date. If the biggest country in the EU doesn’t get a real government soon, then all of those plans start to look more precarious.

Germany, Europe is waiting.

To contact the author: berschens@handelsblatt.com

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