“We in the EU and also in Germany must and should prepare for the event that an agreement is not reached after all.” Angela Merkel informed the German Bundestag on Wednesday morning, stating that “To put it mildly, progress in the negotiations has been very limited.” Britain, sehr geehrte Damen und Herren, is going to be something of a headache for Mrs Merkel.
Wednesday was same day that Germany took over the rotating Presidency of the EU for the first time since January 2007 – a very different EU faces the German Chancellor today.
Now in her fourth term of office, and standing down in 2021, the next 6 months will represent the swan-song for the pastor’s daughter from Hamburg
Back on that Monday morning, thirteen years ago, Merkel was in her first term of office as German Chancellor, Bulgaria and Romania were shiny brand-new additions to the EU Club, the Great Recession was almost a year away – indeed the German economy was surging strongly at the end of 2006 – and the idea of Brexit was nothing more threatening than the wild dreams of the 12-strong cabal of UKIP MEPs.
Conversations in the corridors of the Berlaymont back then were certainly not about global pandemics, 9% contractions for EU economies, gaping black holes in budgets and ongoing negotiations to reach a trade agreement with a former member state. Minds in those 6 months were focused on the negotiation of the Treaty of Lisbon and the Berlin Declaration.
With face-to-face talks with the UK underway in Brussels this week, and the deadline for any request for an extension to the transition period now passed, the clocking is ticking louder than ever for the EU to start facing a new reality if no-deal is to be avoided. Any trade-agreement must be ratified by all EU27 governments, the UK Parliament and the European Parliament before the 31st December 2020. No easy feat, even for someone as experienced as the German Chancellor, especially when one remembers the fate of the CETA deal at the hands of the Wallonians in 2016.
Now in her fourth term of office, and standing down in 2021, the next 6 months will represent the swan-song for the pastor’s daughter from Hamburg, both on the home-front and the EU stage. Under Merkel’s watch will come not only the final months of Britain’s involvement in the EU project, but also the emergence of EU economies from the ravages of the COVID pandemic.
After 15 years in office, the coronavirus crisis has certainly played to Merkel’s strengths. A trained scientist, she has managed the shutting down of the German economy and locking up the German population to emerge with a remarkably low death toll and a remarkably high approval rating (71%).
It hasn’t all been plain sailing in those 15 years though: brought up in East Germany, which didn’t join the EU until reunification in 1990, Merkel’s domestic agenda has not exactly been exciting, and her stance during the Euro crisis where she and her then Finance Minister, Wolfgang Schäuble, took a punishingly hard-line on Greece, insisting that they implement a reform programme and compulsory fiscal austerity, won her few friends, especially in the Southern states who saw her as obsessed with protecting the integrity and survival of the Euro above all else.
“Wir schaffen das!” the Chancellor then declared in the face of the 2015 refugee crisis while throwing open the German borders. A year and 1.3 million asylum-seekers later, she was accused of irresponsibly encouraging migrants to attempt the potentially hazardous journey. Those southern states that form the EU border and who are literally left picking up the pieces aren’t at all sure that they can do it!
Never the most enthusiastic Europhile, it seems to have taken the reality of a meaningful Brexit, and the reactions of individual EU states who – with astonishing speed – slammed their borders shut, ringfenced PPE supplies and suspended the single market in the face of COVID, to bring forth this new Angela Merkel.
Perhaps the sight of this complete lack of unity provoked the fear that the EU could actually start to fall apart? Germany has generally taken a hard line on fiscal responsibility and has always resisted any moves towards mutualized debt. You would have expected a Frugal Five with Germany at its head, and yet here we are with Merkel and Macron cheerleading the formation of an EU Transfer Union.
“It is no exaggeration to say that we are facing the greatest economic challenge in the history of the European Union,” said Merkel recently. Indeed, a survey conducted in the first two weeks of June by the German Economic Institute (IW), a Cologne-based private research institute, has shown German industry leaders are bracing themselves for a rough road to recovery, with only the financial sector having a positive outlook.
In the interests of a quick resolution of the issues dogging the planned Recovery Fund, Merkel is presenting a united front with French President Emmanuel Macron following their meeting on Monday at Schloss Meseberg, the Chancellor’s country retreat north of Berlin, saying that they will work together “to make Europe fit for tackling this crisis”.
Merkel and Macron have been in cahoots over the recovery fund since May, with plans that see the European Commission borrowing money on international capital markets. “We have reached a moment of truth for Europe,” Mr Macron said. “With this resolute Franco-German commitment, we can turn it into a moment of success.”
The pair, leaders of the two biggest EU economies, hope that the deadlock will be broken at an extraordinary summit scheduled for the 17th and 18th of July, with EU Commission President, Ursula von der Leyen, urging EU27 leaders to agree the package by the start of summer recess.
The primary focus is on urging the Frugal Four – Austria, Denmark, the Netherlands and Sweden – to back down and approve the proposed €750 billion fund that will comprise a mix of grants and loans to hard hit states. Macron warning that it would “not be in their interest” to sabotage the plans, as they “could not flourish if the EU single market was harmed.”
Charles Michel, the European Council President is holding “an enormous number of talks” in the hopes of smoothing the way for this ‘Franco-German success’ before the crucial summit. Merkel admits that there is “some resistance to be overcome” and issued an appeal to EU unity, saying that if help wasn’t forthcoming “that would call into question the cohesion and convergence of the EU, and the functioning of the single market.”
An small olive branch has been held out to the naysayers, with Merkel saying that those EU countries who benefit from the Fund must be willing to reform their economies and “make them more future-proof” – a recognition of the exasperation for northern states that have little to spare themselves but whose populations will be mortgaging the future to compensate for southern states’ lack of thrift and inclinations towards largesse.
With meetings now taking place in-person rather than via video-conferencing, there will be hopes that behind-the-scenes soft diplomacy will assist the pledge to achieve a deal that was made by leaders at the virtual summit in June.
Having seen how the much-vaunted EU solidarity turned out to be merely an illusion when the chips were down, the challenge of inspiring excitement and affection for the EU project among member states is not going to be easy – especially with a Germany at the helm, with their reticence to be seen as leading from the front. However, it will be even less easy in 2021 if the UK is seen to be setting sail on HMS Global Britain, unshackled from onerous and protectionist EU rules and regulation.
There must be a great deal of temptation to clip the wings of the British bird, to tie us to EU regulation and restrict our ability to become an agile, flexible, free-trading nation. Merkel will want to end Germany’s presidency with success at the negotiating table, but if there is no compromise on EU red-lines, there is more likely to be a heavy price paid by German car exporters, Italian wine producers and those coastal states that rely so heavily on fishing in UK waters.
Perhaps it is also the fear of what Boris in his freshly painted Voyager jet might achieve – or might encourage other EU states to consider – that has led to such unexpected enthusiasm, by such a pragmatic German Chancellor, for endorsing grants to fiscally imprudent states. Shore up the walls and dole out the sweeties. Lock them all in quick lest they break for freedom like Britain?
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