On July 1st, Germany will take over the EU Council Presidency in midst the Corona pandemic. This presents opportunities for Germany to redefine its European policy. How does Germany perceive its role in the European Union and what are the expectations of other member states for the German Council Presidency?
On July 1st, in the middle of the Covid-19 pandemic, Germany will take over the EU Council Presidency for half a year. There are voices that say that this is a stroke of luck for the EU because it is Germany of all countries that will take over the Council Presidency during this global crisis. The assumption is that as the EU’s largest country it has enough resources and extensive experience to master the extreme challenges that the Presidency will now entail. The Presidency could also be a godsend for Germany itself. The responsibility of the Council Presidency forces the German government to again take on the role of trendsetter and mediator.
Hence, the Council Presidency is a chance for Germany to find a way out of its corner that it has maneuvered itself into. In recent years, instead of functioning together with France as the engine of European integration, Germany has often been obstructive and has provided very little momentum. This left a void that France alone was unable to fill.
In addition, there is the image problem Germany has had in Europe since the Euro crisis. For years, Germany seemed isolated from its EU partners. When the news made the rounds a few weeks ago that half of the aid the EU provided through the Solidarity Fund went to Germany, there was an outcry. Germany – the model student and also disloyal egoist who is doing so well at the expense of others.
Council Presidency as vehicle for a new role of Germany?
With the upcoming EU Council Presidency, the German government – provided it seriously wants to fulfil this task – will be forced to take on a proactive role. The task implies acting as trendsetter, negotiator, and mediator. At the beginning of the Covid-19 pandemic it did not seem as if Germany would assume this role. It unilaterally closed its borders without prior coordination with its neighbors. It then resorted to strict positions in the current conflict over Europe’s efforts to contain the economic consequences of the pandemic.
But with the Franco-German initiative presented by Merkel and Macron on March 18th, the tide seems to be turning. The proposal is nothing less than a masterstroke. For the first time, the Federal Chancellor is showing willingness to take up substantial mutualized bonds. (The 500 billion Euros are roughly the same amount that Germany provided to its own economy even though by comparison the resolution of the European Parliament demands about 2,000 billion Euros.) What is different about this plan is that the bonds are to be linked to the EU Budget, thereby limiting each country's share of liability to their respective share in the EU budget (i.e. about 25% for Germany). This alignment makes the proposal more acceptable for the German Chancellor and her supporters. Hopefully, it also provides a basis for negotiations with those countries which like Germany have categorically opposed debt mutualization.
In essence, the proposal is probably not so much a complete paradigm shift of Germany’s European policy but rather a gradual abandonment of its previous rigid attitude. It definitely breaches a taboo of German European policy and marks a groundbreaking step in accommodating the needs of the Southern European countries. Italy and Spain (both hit particularly hard by the Covid-19 pandemic) but also Greece (only recently recovered from its debt crisis) are facing severe economic crises. Highly indebted Italy points to the disintegration of the European single market as the reason it categorically refuses to take on further debt.
Support and opposition to the Franco-German initiative
Opposition to this proposal was to be expected. The countries which call themselves “The Frugal Four” immediately responded with an alternative draft that explicitly avoids debt mutualization and an increase in the EU Budget. Their proposal rules out grants and instead calls for a temporary emergency fund for loans that may only be used for the reconstruction of the health sector and the economy. Other reservations of some Central European countries must also be overcome. Poland and Hungary are particularly afraid that the size of the existing Regional and Structural Funds could shrink - two Funds from which they greatly benefit. Moreover, they clearly will link their support for the Multiannual Financial Framework to a commitment that adherence to the rule of law not be made a condition of access to the fund.
The European Commission, as charged by the European Council, will present a proposal for a European Reconstruction Fund. Ursula von der Leyen has already announced that it will closely follow the Franco-German proposal. A compromise that all 27 member states will approve is difficult to find. Merkel’s mediation skills will be tested when Germany takes over the Council Presidency in July.
Germans are ready for an active and solidarity-based European policy
The German government can at least count on broad support of the German public. The Franco-German initiative caught people by surprise. On the one hand, in the previous weeks, the government had already adopted a different tone by saying that the old negotiating positions had to be overhauled in light of the global crisis and that Germany would surely have to pay more into the EU Budget. On the other hand, for years the German government under Chancellor Merkel had referred to “the German taxpayer” as a bulwark against a shared EU debt. So now the question arises as to how well this U-turn will be received by German voters.
The concern appears to be unfounded. Polls have shown that Germans are much less skeptical than the German government always claimed. A poll commissioned by the Heinrich Böll Foundation and Das Progressive Zentrum has shown that a majority of Germans do not feel like “Europe’s paymaster”; do not think that the German contribution is too high; and are indeed willing to pay a great sum of money for joint investments in forthcoming EU issues. Moreover, an overwhelming majority of Germans want to see their country pursue an active and collaborative European policy.
For one group it is a matter of solidarity; for another a matter of self-interest because the collapse of the Euro and the breakup of the European single market would cause much greater financial damage for Germany. According to a poll conducted in April, a vast majority of Germans support financial assistance for those EU member states which are hardest hit by the Corona crisis - though they would prefer the ESM loan option. A recent survey of the Max Planck Institute demonstrates that most Germans would even be willing to accept forms of deb mutualization to preserve the Eurozone. All in all, poll results indicate that German citizens are more open to debt mutualization than the German government contends.
Economic reconstruction boosting climate protection and social cohesion
The list of priorities that German ministries prepared long ago have been pushed aside by the Covid-19 pandemic. Agreeing on joint measures to contain the pandemic, relax restrictions, and economic reconstruction will necessarily be the focus of the German EU Council Presidency. Challenges will include making health care systems, industry, and labor markets more resilient and to stimulate inner-European tourism as quickly as possible - a measure that is vital for countries whose economies are heavily dependent on tourism.
It will be crucial that all aid from the Reconstruction Fund be used exclusively for socially and ecologically sustainable projects and thus become an investment in the European Green Deal. In this way, the Reconstruction Fund could also boost climate protection, social cohesion, health care, and digitization. Furthermore, it is critical that the new Financial Framework for the coming seven years (starting in 2021) be adopted and that an agreement on the EU-UK future relationship be signed.
Other urgent issues also require rapid answers
These actions alone will suck up most resources. The situation is aggravated by pandemic-related limitations of capacities. Session capacities in Brussels alone are said to have been reduced by 70%. Already in April, German ambassador to the EU, Michael Clauß, recommended a radical cut to the agenda for the German Council Presidency. Meanwhile, there are unresolved issues that cannot be delayed and that require urgent solutions, such as the European refugee and asylum policy. And Greece and Italy need to see progress in the reform of the Common European Asylum System.
Another top priority is the enforcement of principles of the rule of law. Poland - and even more so Hungary - must be stopped from destroying their democracies and thus the democracy of the EU. Defending the rule of law must not be sacrificed to agreement on a Reconstruction Fund.
Major challenges in a fragile Europe
All this comes at a time where European cohesion is already extremely fragile. The general mood after the distortions of the last years is unstable. In Southern Europe, many old wounds have not yet healed. At the same time, these countries have huge doubts as to whether the EU is actually willing to act in solidarity. These doubts expose a fundamental EU skepticism that has spread to many countries and plays into the hands of right-wing nationalists. In traditionally pro-European Italy, European flags have been set on fire and a majority of almost 70% of Italians currently see EU membership as a disadvantage.
The Nordic countries, on the other hand, have been distancing themselves and are – irrespective of the debt issue – basically skeptical towards further communitarization. Forces generally hostile to European integration are steadily growing in their societies. In Central Europe, some countries are drifting further away from the values of liberal democracy. Poland and Hungary vigorously exploit the pandemic to further curtail the rule of law, the freedom of the media, and participation of civil society.
Germany is confronted with a huge challenge. We must hope that the German government will surpass itself and find its role as a strong engine. The EU’s ability to act and its future will depend greatly on the German government’s willingness to act in the coming six months - and beyond.