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The post Merkel Germany: implications for Europe and the US

Digital format, 28/09/2021, International Webinar

The September 26 German elections could not but be influenced by the figure of Angela Merkel. Her principal legacy is probably to have been a master crisis manager and a pillar of political stability, but she has not staked her career on promoting a truly comprehensive and ambitious vision for Europe. Even regarding the pursuit of German national interests, an overall assessment of her profile as a leader must take into account several missed opportunities for renewal and perhaps even excessive prudence. This vote itself, after 16 years with the same Chancellor, could in any case be described as a bid for moderate and gradual change. In that regard, the fact that younger voters quite clearly embraced the Greens and Liberals as opposed to the two traditionally dominant parties is indicative of a push to ramp up the rate of change.

Voter turnout was high, producing a modest outcome for those parties that are most critical of the liberal democratic orthodoxy and that maintain a strong favorable consensus on European integration.

The two most important macroscopic data that emerge are the decline of the CDU-CSU and (to a certain extent) the rise of the Greens. As of the day after the vote, it appears that the SPD made a significant, albeit probably not decisive, showing with regard to the formation of a government coalition led by the Social Democrats.

In any case, this was the first time that none of the major parties managed to win 30% of the votes; this reveals some political fragmentation that the Merkel era had somehow managed to mask or delay.

In reality, both the SPD and the Greens have radical and moderate-leaning wings: this will be important in negotiations for the formation of a new government, given the delicacy of the compromises required to form a coalition of any kind.

Zooming out to the broader European picture, worthy of note is how the formation of a German government coalition – which could take until the end of 2021 – coincides almost perfectly with the launch of the French presidential campaign slated for January 2022. The implication is a possible deceleration in the political propulsion of Europe’s Franco-German “engine”. Nevertheless, it is also true that the French EU presidency semester, which also kicks off in January, will offer President Macron a chance to rev up the wide-ranging debate on the future of Europe to which Berlin will most certainly want to add its proposals.

The German factor is going to have a decisive influence on the European economic agenda. Germany will need to invest heavily on the domestic front, and especially in the green transition, which raises the question of revising the EU Stability and Growth Pact. With the exception of the inclusion of a certain margin for manoeuver on resources for sustainable transition incentives, some participants felt European fiscal policy would probably maintain relative continuity, predicting a flexible approach that avoided any radical change in either fiscal or budgetary rules.

Some voiced concern that zero or near zero interest rates could have dangerously distorting effects on the European economy. Important also in this sense will be the consensus that emerges from the composition and subsequent choices of the next German government.

In any case, it is going to be crucial to conduct upcoming trade negotiations with the United States – an opportunity for both the EU and Washington to resolve a series of ambiguities regarding the new transatlantic and global trade rules – in a constructive manner.

Many expressed hopes for a more proactive German stance on security and defense, as counterpart to France and with the active support of Italy. In this case, transatlantic relations will certainly remain a fundamental factor in Germany’s decisions, and will also condition choices regarding Europe’s “strategic autonomy” – a concept that has yet to be fully fleshed out in operational terms. In any case, no real progress can be expected in the absence of a strong joint Franco-German impetus.

Russia will probably be the object of increased rigidity in Berlin’s attitude, despite the need to maintain this delicate and necessary relationship. President Biden has sought to quell tensions to a certain degree over recent years; a certain “normalization” of the Russia issue came with the recent “green light” on Nord Stream 2 intended precisely to facilitate the revival of cooperation with Berlin. The next German government will however have to confront an international scenario that – not least at the borders of Europe – has become more competitive and potentially conflictual than in the past.

A certain restraint with regard to China could also be in the offing, spurred by the global context and by specific American demands, but relations with Beijing will have to be cultivated above all in a European key. Berlin’s challenge will be to broaden its perception of China, not only as an economic/trade counterpart (based on the substantially mercantilist bent of recent years) but also as a potential strategic adversary. Germany carries significant weight on a global scale, especially in light of the geo-economic and technological nature of its competition with Beijing. Consequently, Germany’s upcoming G7 presidency will offer an opportunity to foster consensus on various global issues that undeniably put China in the spotlight.

Underscored, in any case, was the fact that German and European decision making processes are going to have to speed up, as witnessed moreover by the recent AUKUS case (the Anglo-American agreement on the supply of nuclear-powered submarines to Australia), which saw an exposed Australia opt for an “Anglosphere” format, partly – and precisely – as a result of the reduced reliability and agility of France and of Europe as a whole. In turn, on the other hand, American political stability is perceived as unpredictable by many Europeans, which clearly implies risks to transatlantic cohesion. All these urgent concerns will be on the table for the next German government.