Berlin Cable

July 01, 2020

Angela Merkel’s Treble Headache

The German chancellor is about to preside over her second EU presidency. Conflicts over the EU budget, Brexit, and China are looming large.

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Angela Merkel has been in power so long she was chancellor the last time Germany’s held the EU Council presidency, way back in the first half of 2007. Back then, the year before the onset of the global financial crisis that rocked the Western world, Europe was a different place. Bulgaria and Romania had just joined the EU; later that year, Slovenia adopted the euro. Yes, voters in France and the Netherlands had rejected a proposed EU constitution, but with Merkel’s help, the “Plan B” Lisbon Treaty (which eventually came into effect in 2009) was already taking shape: onwards and upwards.

Now, a couple of EU crises later, Germany starts its presidency fire-fighting the near-catastrophic economic consequences of the coronavirus pandemic. Lockdowns and social distancing measures have also dramatically reduced the ways in which the EU, the biggest “consensus-producing machine” in history, usually operates. In the early stages of fighting the pandemic, when EU members followed their national rather than European instincts, even some usually cool-headed German observers saw nothing less at stake than the survival of the EU

Changed by the Crisis

Back then, Merkel missed (yet another) chance to show European leadership, and she rues it now. “The first reflexes, including our own, were more national than European,” she told the Bundestag on June 18. “As good as some of the reasons for that may have been, this was foolish first and foremost”—and acting foolishly (unvernünftig) is the most damning (self-)criticism in the Merkel handbook.

Sense has since returned to Berlin, and it is of a new kind. Merkel’s initiative with French President Emmanuel Macron for a European Recovery Fund that introduces an element of debt mutualization is a potential break-through for the EU—for now only a baby-step in the right direction which nonetheless has raised huge expectations in Italy and Spain, inter alia. Also, regarding the EU’s place in the world, the German chancellor has introduced a new tone, speaking for instance about Europe gaining “digital and technological sovereignty.”

The next six months will put now this rhetoric to the test; there are three big headaches in particular that Merkel will have to grapple with.

It’s All About the Money

The first is the big finance fight over the budget and economic recovery. A complex, hard-fought brawl at the best of times, negotiations about the EU’s 2021-27 budget and, tied up with it, the €750 billion recovery program proposed by Ursula von der Leyen’s European Commission (incorporating the Merkel-Macron initiative) will likely demand all of Merkel’s famous patience. The financial questions are supposed to be signed off at a special European summit on July 17-18. 

Merkel will do everything she can to make this happen before the EU takes a summer break. Given that all European governments are facing single or even double-digit recessions, there is an incentive to find a solution quickly. If not, a continued major wrangle over money may well overshadow the rest of the year.

Brexiteers, See Some Sense

Then, there is Brexit. British Prime Minister Boris Johnson, who is having a particularly bad coronavirus crisis in the United Kingdom, has pushed for a quick resolution “during the summer.” Berlin, however, expects the big Brexit drama will reach its next climax in September, with the real deadline being October 31. After that date, it will be near-impossible to get any treaty through the European Parliament.

Negotiations are supposed to be “intensified” in July, with Britain’s chief Brexit negotiator David Frost just having been elevated to the post of Johnson’s national security advisor (he’ll take on the additional role in September). While some in London still think Merkel may ride to the rescue, the German chancellor is highly unlikely to go over the heads of the Commission and chief Brexit negotiator Michel Barnier in trying to reach a deal with the UK. 

In fact, an internal German document of June 15 urged member states to start planning for a “No Deal Brexit 2.0” scenario. “The British government wants to define for itself what relationship it will have with us after the country leaves,” Merkel said in an interview with European newspapers on Saturday. “It will then have to live with the consequences, of course, that is to say with a less closely interconnected economy.” In other words, Merkel’s long-held conviction that the key to a sensible Brexit is to be found in London, and nowhere else, will not change in the coming six months.

Moving on China

The headache of all headaches, though, is the relationship with China. Throughout her tenure as chancellor, Merkel has always paid much personal attention to China policy and visited the country every year. Her thinking and that of her circle had long been “traditional” verging on the naïve of late—still basically believing in “change through trade” (Wandel durch Handel) when all the evidence pointed against it. If anything, it was the Europeans who started to run the danger of being transformed by China.

There are signs that Merkel’s thinking on China is now changing. The summit with Chinese President Xi Jinping and the 27 EU leaders, which was scheduled to take place in Leipzig on September 19 and was regarded as the highlight of the German EU presidency, was postponed after a telephone call between Merkel, Xi, and EU Council President Charles Michel on June 4, without a new date being set. While German Foreign Minister Heiko Maas said he still hopes the summit could take place in 2020, most observers in Berlin do not expect this to happen, if only due to the hugely difficult logistics involved in finding a new date.

The main reason for the postponement of the European summit with Xi was the lack of “deliverables”—the negotiations regarding the “EU-China Comprehensive Agreement on Investments” are nowhere near a conclusion. In her address to the Bundestag, Merkel called China “a strategic partner” while stressing that “it is important that Europe speaks with one voice of all 27 members states [to China]. This is the only way we can convincingly stand up for European values and interests.”

Taken together with her comments on Europe’s “digital sovereignty” (“We need to be in a position to decide ourselves where European independence is called for and how we implement it—for instance with regards to a safe and trustworthy European data infrastructure…”), Merkel is noticeably moving toward a tougher stance on China, possibly including the Huawei question which the chancellor, in typical fashion, has kicked down the road for far too long. It one takes the “EU tool box” on the cybersecurity of 5G networks seriously, the Chinese company can have no role in the German and European roll-out.

The Most Difficult Task

Recalibrating the China relationship is the more difficult for Merkel as the United States, under President Donald Trump, has been behaving like the proverbial idiot of the global village. Calling Europe “worse than China,” Trump has sought to diabolize and antagonize both Brussels and Beijing at the same time, and many are bracing for more import tariffs being slapped on European goods as the US presidential election campaign heats up. The fact that US Secretary of State Mike Pompeo has discovered an urge to talk with the EU about China all of a sudden is seen as tactical–or worse–in Brussels and Berlin. 

“We grew up in the certain knowledge that the United States wanted to be a world power,” Merkel said in her interview over the weekend. “Should the US now wish to withdraw from that role of its own free will, we would have to reflect on that very deeply.” The outcome of the US presidential elections on November 3 may lead to that reflection becoming a little less deep. It is clear, however, that Angela Merkel, in the twilight of her exceptional, four-term chancellorship, has started thinking about Europe in a whole new way.

Henning Hoff is executive editor of INTERNATIONALE POLITIK QUARTERLY.

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