international analysis and commentary

New prospects for Europe with a renewed Franco-German relationship?

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German Chancellor Angela Merkel’s centre-right CDU has won the last three regional elections in Germany. This show of political strength included beating the centre-left SPD in its heartland, North Rhine-Westphalia, the most populous German region, making the victory a good indicator for the upcoming federal elections in September. And with the number of refugee arrivals falling, the Christian Democrats were able to easily keep at bay the right-wing AfD populist party, which scored well below 10% in the three elections. While Merkel’s challenger, the Social Democrat Martin Schulz, surfed on a wave of positive media coverage and enthusiasm among the population after his nomination as candidate for the chancellorship in January, he has crumbled in the polls and his party is, yet again, far behind the CDU with little chance of beating them in September.

On the other side of the Rhine, the pro-European candidate Emmanuel Macron pulled off a historic victory by beating the far-right Marine Le Pen by the second highest margin in French history. On his first full day in office he flew to Berlin to emphasise his commitment to the Franco-German relationship as the engine of Europe. If we look across the Channel, we see that being in the midst of an electoral campaign, the UK is far less well prepared for the Brexit negotiations than the EU is – another sign of European political recovery.

Angela Merkel and Emmanuel Macron

Does this mean that the German government can now lean back and just carry on with its approach of containing damage and repairing failed policies? Certainly not. Now is the time for Germany to step forward to ensure that extremism is not a political option, neither in Germany nor in Europe. It should make sure that France remains a strong player in Europe and help the new French president to further weaken the looming alternative from the far-right. In other words, Berlin should see the election of Macron as an opportunity to breathe new life into the European project and to brace for a post-Brexit Europe.

Preparing for Brexit negotiations was the main purpose of the last EU summit on 29 April, where the EU-27 leaders agreed unanimously on the guidelines for the stages and priorities of the upcoming negotiations. Before any deal on the relationship with the UK after exiting the Union is reached, the European leaders stated that the rights of their citizens living in the British Isles and vice versa need to be safeguarded. Prior to any post-Brexit trade agreement, the EU also wants guarantees that the UK will honour its obligations to the EU budget. According to Angela Merkel, establishing common ground among the EU-27 leaders “has succeeded extremely well so far”. Thus, the EU’s basic negotiating position is clear and shall remain firm.  Michel Barnier, the EU’s chief negotiator, announced that formal negotiations will not start until after the UK elections on 8 June. These negotiations are not likely to be any different with a new tenant at the Elysée Palace.

But Macron’s victory in the French presidential elections will certainly trigger other new developments in the EU framework since he has not been short on solemn rhetoric, advocating a “refoundation of Europe”. This is what he emphasised during his inaugural meeting with Merkel. The German Chancellor, on the other hand, tends to shy away from strong words and is more inclined to take smaller steps. She has not come forward with new ideas for Europe or the Eurozone. Her pragmatic approach is simply to “develop a roadmap for the European Union’s medium-term perspectives”. This could mean that she might follow President Macron and help him with the implementation of structural reforms on the European stage, only considering a Treaty change “if it is useful”. Her challenger Martin Schulz, if he became chancellor, would go a step further though and attempt a Treaty change by putting a constitutional treaty back on the table, according to the Social Democrats’ manifesto for the federal elections.

One of the areas where not only Germany and France, but the majority of EU countries, will proceed with deeper integration amid Brexit negotiations is military cooperation. As a UN Security Council veto power and with its traditionally significant military outreach still relevant on the global stage, the UK used to put the brakes on more EU military integration outside of NATO. The prospects of a new European military structure now look somewhat brighter. This is carefully not been described as a common headquarters, but as the new ‘Military Planning and Conduct Capability (MPCC)’ facility, which will allow EU training missions in Africa to be coordinated more efficiently and will create a common fund for armament expenditures. The project, strongly advocated by foreign affairs chief Federica Mogherini and adopted unanimously by the Council of Ministers, shows that the EU is actually capable of acting, even on sensitive areas such as security.

More controversial from a German prospective are the major changes, proposed by Macron, in the financial framework of the EU. Part of his plans to relaunch Europe is to enhance cooperation within the Eurogroup. This would involve a special budget and a common Finance Minister for the Eurozone ,as as well as a Parliament controlling their decisions. The proposed reforms were greeted with scepticism by European Commission chief Jean-Claude Juncker, who considered them to be “a very dangerous forest”, although he has not dismissed them completely. Whereas Merkel and her finance minister Wolfgang Schäuble have also been rather sceptical of the ideas, insisting on budgetary discipline first, their junior coalition partner, the Social Democrats (SPD), openly supports such moves towards closer monetary integration. In fact, the SPD is explicitly calling in its manifesto for a genuine “government” to preside over the common currency.

When it comes to Eurobonds, Merkel and Schäuble have systematically rejected the idea of sharing liability of sovereign debt. In light of such a clear position, Macron has made a clever move by nominating a cabinet that includes key actors from the centre-right who are known for budgetary discipline. This can reassure the German government that France is committed to fulfilling the Maastricht criteria and reducing its deficit. The new French president further assured that his new government was not in favour “of the mutualisation of existing debt in the Eurozone”. However, he might push for “Eurobonds” in the future once a common framework for them has been set up.

Beyond Germany, the EU institutions themselves are in a difficult position regarding Macron’s revolutionary proposals for a renewed European structure. On the one hand they are relieved and grateful that the most EU-friendly of all the presidential candidates in France got the top job and therefore need to cooperate with him. Yet, on the other hand, they obviously will uphold established rules and existing treaties.

Far more severe than Brexit, the election of Marine Le Pen would have shaken the European foundation to its core since she and her far-right Front National reject both the common currency and the European project in its entirety. This is why European leaders across the party spectrum will try and avoid the rise of someone like her in the future. In sum, there are strong incentives to “reward” President Macron with at least tactical victories that he can sell at home.

Although dreaded by the Germans, particularly by the centre-right CDU, this could mean giving Macron more flexibility when it comes to its budget and meeting deficit criteria. Unlike the SPD, Angela Merkel’s party has not published its manifesto for September yet. It is highly unlikely that it will include the call for Eurobonds or a government of the common currency, given the reluctance of the chancellor and her finance minister. However, by not mentioning it at all, they could have enough wriggle room to come to an agreement that can satisfy both sides. They can show firmness when addressing the concerns of German voters by standing by their word, while also letting France have its way to some extent. Coordinating and harmonising monetary policies could indeed strengthen the common currency and make it less vulnerable to external threats, which remains a common concern.

What is clear is that both Germany and France have expressed a commitment to further deepen integration and financial harmonisation. The international framework, characterized by recently cooled down relations between Berlin and Washington, may provide an additional reason to strengthen the Franco-German relationship as Europe’s driving force.