French
President Emmanuel Macron will be joining Angela Merkel in Berlin in an attempt
to reaffirm the Franco-German consensus on Eurozone reforms. That is a tall
order.
The
Chancellor is under pressure to amend or discard President Macron’s agenda on
political consolidation.
No debt mutualization
Ahead of
the EU Summit in June, Macron’s stated priority is to defend the Eurozone
against the next financial crisis. Germany seems reluctant to concede to any
proposal that requires debt mutualization or social transfers, although it is
willing to pick up its own share of budget contributions, the German public
broadcaster DW reports.
Peculiarly
for the Franco-German axis, the emerging disagreement is framed as a conflict
between an intergovernmental and a federalist approach to the EU.
Critics of
the Macron reform agenda in Germany see calls for a Eurozone finance minister,
a budget, a banking union, a parliament, investment and social transfer policy
tools as violating German sovereignty. Merkel’s conservative hardliners, both
in the CDU and the Bavarian CSU, are reluctant to accept a eurozone finance
minister, managing a “federal budget,” mostly paid for by German taxpayers.
Commenting
on President Macron’s address to the European Parliament on Wednesday,
Alexander Dobrint, of the Bavarian CSU, clearly objected to the idea of a
Eurozone finance minister. In the past, the Bavarian CSU has frequently
objected to the redistribution between the German south (i.e. Bavaria) and
states with a deficit, including Berlin.
The political cleavage is widening
Macron, an
investment banker, has a macroeconomic perspective and is eager to ensure that
the Eurozone is ready to counter downturns in the economic cycle by means of
investment and quantitative easing. That is an anathema to the German
rules-based economic management approach, which insists on a surplus come what
may,.
Christian
Democrats want first and foremost for EU member states to agree to more
contributions to the EU budget, filling the gap opened by the UK’s decision to
leave the EU, currently the second biggest contributor after Germany.
German
Christian Democrats are equally reluctant to accept the notion of a banking
union that would pool insurance deposits from European lenders to provide a
solid guarantee across the Eurozone.
Germany is
reluctant because a single guarantee scheme may be interpreted as a form of
debt-mutualization. The new German finance minister, Olaf Scholz, hinted Berlin
may be willing to concede on this point, if and when European lenders were
effective in offloading non-performing loans (NPLs). Scholz, a Social Democrat,
is referring to countries such as Greece, Italy, and Portugal, where NPLs have a
double-digit share of lenders’ total portfolio. That could take the best part
of the coming decade.
The changing nature of German politics
The
transformation of Germany from an enthusiastic advocate of federalism to an
advocate of intergovernmental approaches has been gradual, but best exemplified
by the Free Democrats (FDP). The traditional party of German business was for
fifty years the reliable Euro-enthusiastic advocate of political integration
and the second pillar to centre-right governments.
In September
2017, FDP campaigned on a pro-Russian, anti-immigration and Eurosceptic
platform that was hardly distinguishable from the discourse of the Alternative
for Germany (AfD). It should be recalled that under Bernd Luke, AfD joined the
British and Polish Conservatives (Pis) in the formation of the European
Conservatives and Reformists Group, placing an emphasis on
intergovernmentalism.
Macron no
longer deals with the political landscape he found in Germany prior to the
September 2017 elections. In her fourth term, Chancellor Merkel is being
pressed to address the German national interest, leaving behind the long-held
belief that the German interest is the European interest. And the mood appears
to be the same in the Netherlands, Finland and the Baltics. In sum, the Franco-German axis comes to embody
a North-South divide with political substance that calls into question Europe’s
political engine.
https://www.neweurope.eu/article/macron-berlin-realign-consensus-eurozone-reform/