22 November 2021

EPC: Germany in the EU after Merkel: A view from the Netherlands

The Dutch government will look back fondly on the Merkel years in Germany, its close ally. But some important divergences did start to appear in the final stages – and may only become more commonplace with the new German government.

Germany is not only the Netherlands’ most important neighbour and trading partner but also its most important ally in the EU. The Hague’s close relationship with Berlin has allowed the Netherlands to punch above its weight in European politics. The two countries traditionally share similar views on economic, financial and monetary matters, committed to fiscal prudence, budget discipline and a rules-based approach to the Economic and Monetary Union. During the 2010 eurozone crisis, the two partners worked closely to shape the European response, promoting austerity measures and structural reforms. The Dutch government not only relies heavily on its German counterpart to represent its (frugal) interests during these years. It also counts on the latter – and some of its key figures, such as former finance minister Wolfgang Schäuble – to take most of the political heat.

The Dutch government, generally more reserved towards a further deepening of European integration, could also count itself fortunate with a German Chancellor who took a very consensual approach to European integration and did not seem eager to engage with French President Emmanuel Macron’s ambitious European reform agenda. In fact, The Hague does not necessarily deem Angela Merkel’s supposed lack of vision for the EU – an often-heard criticism – a shortcoming. Dutch Prime Minister Mark Rutte, emulating the words of former Chancellor Helmut Schmidt, himself once said that a vision was like an elephant obstructing one’s view.

The Netherlands, the junior partner

This is not to say that the two partners always saw eye to eye on EU affairs during Merkel’s tenure. The Dutch government saw itself side-lined on several occasions, such as the 2010 Deauville agreement, where France and Germany bilaterally agreed, among other things, to abandon automatic sanctions for non-compliance with the Stability and Growth Pact (SGP). This caused much consternation on the part of the Dutch government. More recently, in 2020, Germany and France proposed an ambitious COVID-19 recovery fund, marking the former’s departure from the ‘Frugal Five’, a collation that strongly resisted attempts at EU debt mutualisation in the past.

These examples underscore two important features of the Dutch–German relationship. First, the two partners do not necessarily share the same sense of duty towards the EU. As the EU’s most powerful member state and one of the engines of European integration, Germany feels responsible for not only the safeguarding of solidity in the EU and eurozone but also the cohesion of the Union and success of the European project more generally. Second, while Germany may be the Netherlands’ closest ally in the EU, France, by default, remains Germany’s closest European partner.

Anticipating divergencies

To better anticipate potential divergences in European priorities, The Hague would do well to bear in mind these two features when building a new relationship with the next German government. After all, such divergences may well become more common under a traffic-light coalition of Social Democrats (SPD), Greens and Liberals (FDP). The next German government will likely reaffirm the ‘shift’ in Germany’s EU policy that Merkel set in motion in the wake of COVID-19; towards a slightly less frugal and slightly more reform-minded European policy.

The SPD’s Olaf Scholz, Germany’s next Chancellor, was one of the drivers behind the EU recovery fund. During its election campaign, his party spoke of a paradigm shift towards more solidarity and a fully-fledged fiscal, economic and social union. The Greens, meanwhile, want to turn the recovery fund into a permanent instrument and are pushing to reform the SGP. Although the FDP is more fiscally conservative than its two future coalition partners – and may well source the next finance minister –, Germany is not likely to simply return to its ‘ordoliberal self’ under the next government. The Netherlands will have to come to terms with this....

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