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Abu Dhabi, UAESunday 16 December 2018

Germany, the rock that steadied Europe, is now frustrating its reformers

Emmanuel Macron's plans to reform the EU are at risk of becoming a casualty of the political gridlock in Germany

French president Emmanuel Macron's plans for a European renaissance might wither on the vine now that Germany is in political disarray
French president Emmanuel Macron's plans for a European renaissance might wither on the vine now that Germany is in political disarray

When the energetic outsider Emmanuel Macron was elected president of France in May, he made it clear he would have to wait until the German elections in September to launch his project for a European renaissance. Come September, the plan was put on hold while Angela Merkel, the German chancellor, negotiated a new ruling coalition. Now that these talks have failed, Germany is in a rare state of political disarray and there may be elections again in the New Year. In any case, Europe will be twiddling its thumbs for a few more months.

That is the most optimistic view. A more realistic one says that Mr Macron’s bold ideas – principally to bolster the half-finished architecture of the euro, the crisis-ridden common currency, by appointing a euro-zone finance minister – may wither on the vine while he waits for a strong partner in Berlin.

Thomas Matussek, a retired German ambassador, says that Mr Macron opened a window of opportunity for the European Union to relaunch the euro-zone, initiate a new era of defence cooperation in the absence of Britain, as it prepares to leave the bloc, and address the problems of unregulated migration and terrorism. If the Germans are without a stable government for a few more months, Mr Matussek believes, “we might have missed a historic opportunity”.

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These gloomy thoughts stem from the reality that Mr Macron cannot proceed without Germany, which provides the financial muscle to back the French president's plans. As an interim chancellor Mrs Merkel will not be taking any bold steps because she will be focused on internal matters. And if she is re-elected and manages to cobble together a government, she will still be seen as wounded, in office because the German system cannot immediately come up with a replacement for the woman who has dominated its politics for 12 years.

Two reasons are given for the breakdown of the talks: that the pro-business Free Democrats, who walked out, are even more opposed to the idea of German tax-payers taking on responsibility for insolvent Italian banks than Merkel’s own CDU party, or that the chancellor is exhausted after more than a decade in power.

Unlike in more ruthless political systems, Mrs Merkel’s position does not seem to be in any immediate danger. There is no visible challenger in her own party, serious rivals having all been quietly scythed away over the past 12 years. If she runs again in new elections, she might be able to maintain her position, but the fundamental issue of what happens to Europe after her would not be resolved.

As for Mr Macron, he is a man in a hurry, fully aware of how speedily authority can drain away from elected leaders in times of economic stress. He has set himself the goal of embedding his European revival project in the Franco-German political machinery by next summer. It is looking increasingly as if the Germans will be too distracted by internal political problems to focus on grand schemes.

Given that 2017 was said to be the year when the European Union emerged from its decade of crisis, it is worth looking at the structural problems which undermine the bloc. The first is that the eurozone has turned Germany into a hugely successful economy which now dominates the bloc financially and is its political arbiter. This is unsettling for the smaller nations, and the reverse of the outcome originally desired, which was to curb German power through European institutions. This problem of an over-mighty Germany has got worse now that Britain, the second biggest contributor to the bloc, is set to leave.

The bloc has lost whatever moral authority it had due to its mishandling of the migration crisis. Mrs Merkel declared an “open door” policy in 2015, letting in more than a million migrants, which swiftly turned into a “closed border” policy, trapping the late comers in the Balkans. Having always said it would not copy the harsh Australian policy of “offshoring” immigration checks, it is now doing the same, initially with Turkey and now with Libya, where Italian doctors say thousands are held in “concentration camps”.

Over the longer term, it is clear that the EU has been too inward-looking and has all but ignored countries to the south beyond the Mediterranean. It has been a European club, designed to end European wars, and has done little to spread its affluence to the poorer countries to the south. There is a clear contrast with Southeast Asia, where initial Japanese investment ignited the economies of South Korea, Thailand and beyond in a virtuous chain which has spread prosperity throughout the region. The policy of the EU has been to erect tariff barriers, particularly against farm imports.

All these problems exist, but they do not mean that the European Union is on the point of collapse, a conclusion drawn by the ideologues of Britain leaving the bloc. They fantasise that the structure is rotten and that the end of the Merkel ascendancy combined with the loss of British funding will bring it crashing down.

This is fundamentally misguided. Even if the European project has serious flaws and there are differences between countries of the north and south, east and west and between eurozone members and those who have kept their own currencies, the will of the European political class as a whole to keep the show on the road is strong.

Even countries such as Poland, where Catholic fundamentalists are bitterly critical of the liberal instincts of Brussels, are not going to isolate themselves from the bloc and face Russia alone. In France Mr Macron was elected on a passionately pro-European platform. And as for the German political class, they are still sufficiently aware of their totalitarian history to talk of fulfilling their responsibilities to Europe. Such sentiments may in the end secure Mrs Merkel another term, albeit one with limited ambition when the time cries out for new thinking.

Alan Philps is a commentator on global affairs. On Twitter @aphilps