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German Chancellor Angela Merkel looks on during  a news conference with Portugal's Prime Minister Antonio Costa in Lisbon, Portugal, May 31 2018. REUTERS/Rafael Marchante - RC1EA93519C0
Order from Chaos

Germany’s chancellor offers a unifying economic plan to mollify a divided Europe

Editor's Note:

In an interview with a German newspaper last weekend, followed by a speech in Berlin on Monday, Chancellor Angela Merkel laid out her unifying plan for a divided continent. The following analysis, by Constanze Stelzenmüller, was originally published in the Financial Times.

Angela Merkel, Germany’s chancellor, has ended her long silence on the proposals for European reform made by the French president Emmanuel Macron. In an interview with a German newspaper at the weekend, followed by a speech in Berlin on Monday, she laid out her unifying plan for a divided continent. Divisions, it must be said, to which German policies and inaction have contributed.

The chancellor is stretching out a hand not only to France, but also to Europe’s economically beleaguered south. Just as importantly, her plan is one that the more parsimonious and debt-averse northern Europeans can sign up to. With its emphasis on embracing technological change in a way that leaves no one behind, it is crafted to appeal not just to her coalition partners at home, the Social Democrats, but to future partners like the Greens.

Ms. Merkel’s plan is an implicit apology for past German intransigence on economic policy, and signals that Germany wants to return to its old role as a bridge-builder. She promises a “respectful” approach to Italy’s populist governing coalition— a rebuke to earlier criticism of the Italian vote by German EU commissioner Günther Oettinger.

Ms. Merkel accepts that Germany, Europe’s richest economy, needs to contribute more than others, while acknowledging that there is resistance on the part of northern and eastern EU member states to further integration. Her plan, unlike Mr. Macron’s impassioned calls for deeper reform, stands a chance of forming the basis for a new European consensus.

In effect, Ms. Merkel is now fleshing out her announcement in a May 2017 campaign speech that we Europeans needed to “take our fate into our own hands” in the era of a rising China and Donald Trump. Europe, she says now, must “renew the promise of peace and security” to its citizens on three “existential” questions: monetary union, immigration and defence. Only then can it stand firm in defence of a rules-based world order.

On the eurozone, Ms. Merkel still rejects any form of debt mutualization. Instead, she supports banking and capital markets union, as well as a “European Monetary Fund” with special new short-term emergency credit lines. She wants to use the EU budget for investments in growth and innovation in Europe’s more troubled economies.

Ms. Merkel is much closer to Mr. Macron on immigration and asylum policy. She accepts that an earlier German-led attempt to force a mandatory quota system on member states was a failure. Instead, she sketches a system of common European asylum standards, a real European border security agency and a European refugee agency.

On defence, Ms. Merkel floated the idea of a European Security Council, and says she’s “positive” on Mr. Macron’s “European intervention initiative” for rapid military action in global hotspots. But she also says it shouldn’t be set up outside existing European frameworks, and ought to be open to the UK.

Euro-federalists and small-Europe nationalists alike will find a lot to disagree with here. The maximalists will object that an investment budget of just above €10bn is derisory. The chancellor’s defence plans invite the question of how Germany intends to achieve them with outdated forces and an insufficient military budget. The illiberal governments in Budapest and Warsaw may simply reject these ideas wholesale.

Nonetheless, Ms. Merkel’s initiative is a genuine attempt at a positive strategic response to a dramatic array of new internal and external threats to Europe. Its conciliatory tone holds out the promise of a big tent that could appeal to many EU member states. They should take up the chancellor’s offer. As she said on Monday, quoting the philosopher Immanuel Kant: “He who has no goals must endure his fate; he who has a purpose can shape it.”

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