Can’t please everyone

Merkel-Macron EU deal makes Paris happy but angers Bavarian allies

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Having the last laugh, are we? Source: Imago / Emmanuele Contini

In Paris and Berlin the relief was palpable after Tuesday’s Franco-German meeting. Chancellor Angela Merkel at last agreed to Emmanuel Macron’s call for a common budget for the euro zone, ending a lengthy impasse on the topic, which is highly contentious in Germany.

The French president made concessions to the chancellor’s demands on asylum policy across the European Union, ahead of a crucial EU summit next week. Mr. Macron called the bilateral meeting, held in Meseberg Palace outside Berlin, a “moment of truth” for Europe.

Although short on details, the resulting Meseberg Declaration paves the way for far-reaching reform of the EU and of the euro zone. The two leaders agreed to cut the number of European Commissioners; to strengthen the EU’s border agency, Frontex; to create a European Monetary Fund; and to adopt a common European response to the refugee influx.

All are major issues but none more so than the last. Migration now tops the political agenda in Germany after conservatives demanded tougher immigration policies. The row, which pits the chancellor against her own interior minister, Horst Seehofer, backed by his hard-line Bavarian Christian Social Union, could still bring down the German government. Mr. Seehofer and his CSU had threatened a unilateral crackdown on German borders, a rebellious move which could further disrupt Europe’s fragile unity. Ms. Merkel saved her job by the skin of her teeth on Monday by promising a European solution on asylum by next week.

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Have you joined the axis of the willing yet? Source: DPA

Although Mr. Macron’s concessions on asylum strengthen Ms. Merkel’s position as the EU summit looms, her bargain infuriated right-wingers, opening a second front in her battle with the CSU.

“We shouldn’t create new shadow budgets or compromise on the stability of the currency,” said Markus Söder, Mr. Seehofer’s successor as Bavarian state premier. He accused Ms. Merkel of buying French support on asylum policy with German money for the euro zone. “They are two different areas,” he said, and hinted the chancellor was not upholding “the rule of law.” The Bavarian leader called for scrutiny of the Meseberg deal.

That deal sets up a shared euro-zone budget to boost investment and promote economic convergence among the currency’s 19 national members. Currently, only the EU has a common budget, but the 28-country bloc includes several countries that have kept their own currency, including Britain, Sweden and Poland. The new budget will be implemented by 2021, as the details of its financing still need to be hammered out.

Lowest common denominator

The euro-zone deal laid out in Meseberg doesn’t go quite as far as Mr. Macron had hoped ever since he took power a year ago. He had envisioned a sort of reboot of the EU, and deeper European integration, to reverse the tide of populism after the Brexit vote and boost the bloc’s economies.

But even this watered-down deal between Ms. Merkel and the French president was too much for Bavaria’s right-wingers. For many German conservatives, a common euro-zone budget suggests yet another bill for German taxpayers.

So the CSU upped the ante on Ms. Merkel as the Bavarian premier met the right-wing chancellor of neighboring Austria, Sebastian Kurz, on Wednesday (see picture). The meeting had long been planned, but the timing for Bavarian hardliners could not have been better. Mr. Söder and Mr. Kurz both want a restrictive asylum policy. It remains to be seen whether this second meeting of the “axis of the willing” against illegal immigration will further weaken Ms. Merkel’s position in Berlin.

Jean-Michel Hauteville is an editor with Handelsblatt Global in Berlin. To reach the author: hauteville@handelsblatt.com

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