16 January 2020

Financial Times: Angela Merkel warns EU: ‘Brexit is a wake-up call’

[...] Her solution is to double down on Europe, Germany’s anchor. “I see the European Union as our life insurance,” she says. “Germany is far too small to exert geopolitical influence on its own, and that’s why we need to make use of all the benefits of the single market.” [...] 

In the twilight of her career — her fourth and final term ends in 2021 — Ms Merkel is determined to preserve and defend multilateralism, a concept that in the age of Trump, Brexit and a resurgent Russia has never seemed so embattled.

This is the “firm conviction” that guides her: the pursuit of “the best win-win situations . . . when partnerships of benefit to both sides are put into practice worldwide”.

She admits that this idea is coming “under increasing pressure”. The system of supranational institutions like the EU and United Nations were, she says, “essentially a lesson learnt from the second world war, and the preceding decades”. Now, with so few witnesses of the war still alive, the importance of that lesson is fading.

Of course President Donald Trump is right that bodies like the World Trade Organization and the UN require reform. “There is no doubt whatsoever about any of that,” she says. “But I do not call the world’s multilateral structure into question.” [...] 

The UK’s departure will continue to hang over Brussels and Berlin — the countdown for a trade deal will coincide with Germany’s presidency of the EU in the second half of this year. Berlin worries a post-Brexit UK that reserves the right to diverge from EU rules on goods, workers’ rights, taxes and environmental standards could create a serious economic competitor on its doorstep.

But Ms Merkel remains a cautious optimist. Brexit is a “wake-up call” for the EU. Europe must, she says, respond by upping its game, becoming “attractive, innovative, creative, a good place for research and education . . . Competition can then be very productive.”

This is why the EU must continue to reform, completing the digital single market, progressing with banking union — a plan to centralise the supervision and crisis management of European banks — and advancing capital markets union to integrate Europe’s fragmented equity and debt markets. [...]

In what sounds like a new European industrial policy, Ms Merkel also says the EU should identify the technological capabilities it lacks and move fast to fill in the gaps. “I believe that chips should be manufactured in the European Union, that Europe should have its own hyperscalers and that it should be possible to produce battery cells,” she says.

It must also have the confidence to set the new global digital standards. She cites the example of the General Data Protection Regulation, which supporters see as a gold standard for privacy and proof that the EU can become a rulemaker, rather than a rule taker, when it comes to the digital economy.

Europe can offer an alternative to the US and Chinese approach to data. “I firmly believe that personal data does not belong to the state or to companies,” she says. “It must be ensured that the individual has sovereignty over their own data and can decide with whom and for what purpose they share it.” [...]

Germany, she admits, is still “slightly hesitant” on banking union, “because our principle is that everyone first needs to reduce the risks in their own country today before we can mutualise the risks”. And capital markets union might require member states to seek closer alignment on things like insolvency law. [...]

For years now, Europe and Germany have been slipping down the US’s list of priorities. “There’s been a shift,” she says. “President Obama already spoke about the Asian century, as seen from the US perspective. This also means that Europe is no longer, so to say, at the centre of world events.”

She adds: “The United States’ focus on Europe is declining — that will be the case under any president.” [...]

“As was the case in Germany, [China’s] rise is largely based on hard work, creativity and technical skills,” she says. Of course there is a need to “ensure that trade relations are fair”. China’s economic strength and geopolitical ambitions mean it is a rival to the US and Europe. But the question is: “Do we in Germany and Europe want to dismantle all interconnected global supply chains . . . because of this economic competition?” She adds: “In my opinion, complete isolation from China cannot be the answer.” [...]

Full interview on Financial Times (subscription required)

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