Politics & Policy

Deus Ex Merkelna

Merkel at the European Union summit in Brussels in June. (Reuters photo: Gonzalo Fuentes)
Germany’s chancellor could bring about reforms to strengthen the EU, but why would she want to?

Later this week, Germans are very likely to reelect Angela Merkel as chancellor. Mainstream pundits will take a strong Merkel victory, add it to the one for Emmanuel Macron in France earlier this year, and tell us a story: After the shocks of Brexit and Donald Trump, populism is in retreat. Maybe it was just an Anglo-American phenomenon. But on Continental Europe, things are going better. Europe’s economy is growing, and the grand visions of liberal internationalism can proceed again. Now is the time to make sure the dragon is really dead.

The editorial writers have already written up an agenda for Angela Merkel and how she will reform the eurozone and the European Union. This, they say, is how she will build her legacy as a great European stateswoman. All the sensible people now recognize that the EU’s obvious defects of construction were the irritants that inflamed the populist revolt. (Why didn’t they recognize it before now? Oh, let’s not get bogged down in the past.) We can fix Europe.

Par exemple, the aspiring European superstate allows freedom of movement between member states, but it has no unified policy of border control, no body for controlling entry into the European Union. This problem is currently making the EU more unpopular by the day in Italy, which struggles to handle the inflow of migration across the Mediterranean. Then there are the big fiscal design problems. The EU has a central bank for the countries that use the euro currency, but these states have no united fiscal policy, and mechanisms for bailout or fiscal relief barely exist. Hence all that unpleasantness in Greece, Portugal, and Ireland a few years back.

Mujtaba Rahman, the managing director for Europe at Eurasia Group, a political-risk consultancy, cautions that much will depend on Merkel’s coalition partners, but lays out the conventional thinking this way:

After a rocky 12 months menaced by populist parties, core Europe suddenly feels as if it is on the march again. The arrival of Emmanuel Macron in the Elysée Palace, Brexit, the growing transatlantic divide and Angela Merkel’s likely reelection as chancellor have all provided sudden impetus to fire up the Franco-German motor and bolster the EU — especially the eurozone.

The generally accepted thesis is that everything depends on Macron. The French president will need to overhaul France’s labor markets and improve its fiscal situation as a pre-condition for any Franco-German cooperation over eurozone reforms.

Rahman is correct. I’ve heard as much from nearly a dozen European and American policymakers, diplomats, and influencers. Once Macron does his part to wean the French off their accreted worker protections and labor rules from the 20th century, a diplomat told me, Germany will have “the capacity” and “the opportunity” to reform Europe for the benefit of all.

Significantly, though, nobody says that Merkel will have a strong motive or incentive to do so. It is more of a plot device: How will European problems be solved? Macron will free the French economy and then there will be a Deus Ex Merkelna.

This story underestimates the European capacity for self-sabotage. Rahman says Europe was “menaced by populist parties.” What he is describing is actually voters and citizens expressing their dissatisfaction with the current leadership class of Europe. The high-handedness of Rahman’s judgment reflects the high-handedness of European leaders, the same quality that brought them to this crisis.

Rahman says Europe was ‘menaced by populist parties.’ What he is describing is actually voters and citizens expressing their dissatisfaction with the current leadership class of Europe.

It was under the current liberal internationalist management of the Union that David Cameron had to return to the British public and say that he’d won nothing from Brussels in pre-Brexit negotiations. No concessions on control of Britain’s borders, not even after Angela Merkel invited more than a million migrants to the heart of Europe in one year. Now the European Union is about to lose 10 percent of its annual budget when the United Kingdom leaves.

Why would Merkel reform the economic structure of the European Union, which has kept German living standards rising, the German middle class thriving, and German exports competitive in Europe and beyond? Out of sheer gratitude to Emmanuel Macron for doing what she believes is the right thing for France on its own terms?

The president of the European Commission, Jean-Claude Juncker, gave his “state of the union” address last week. There was some mention of new financial structures for Europe, but far more important was his call for the dramatic expansion of the euro as the currency of the entire European Union. This expansion would further bolster the German model of widely shared prosperity within Germany.

It was Angela Merkel’s canny leadership for Germany that helped to create the populist mess throughout the rest of Europe. The lesson that she and German citizens have learned from all the political turmoil of the last decade is that Germany was right, and until Europe becomes more like Germany, the real Germany has to keep on dominating the Union and taking the biggest rake from the table for the service.

There is a good chance that Emmanuel Macron will not be able to reform the French labor market. And if the only hope for the liberal international order is Angela Merkel, it may be in worse shape than anyone thought.


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