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[...]if the parties involved — the Christian Democrats led by Chancellor Angela Merkel and the Social Democrats — do manage to pull it off, it would be truly radical in one respect: the section on the future of the EU lays out the biggest push by Germany towards continental integration since the Maastricht treaty a quarter of a century ago.
In the last grand coalition deal, in 2013, there was hardly any reference of Europe beyond the usual clichés. The big issue then was the national minimum wage. But in last week’s agreement, Europe is the number one item. This section goes way beyond a general willingness to engage with the French president Emmanuel Macron on eurozone reform. It declares a readiness to expand the EU budget with a larger German net contribution. It specifically supports a eurozone budget to fund macroeconomic stabilisation, social convergence and structural reforms.
The way I read this is that the European Stability Mechanism, the rescue umbrella, would be part of an enlarged EU budget and not, as now, run by member states. This is exactly what Jean-Claude Juncker, European Commission president, demanded. He must be delighted. It marks a momentous shift away from the inter-governmentalism of Ms Merkel towards a more integrationist position. I just wonder what the conservatives in the CDU and their Bavarian allies, the Christian Social Union, make of the chancellor’s latest U-turn.
On the ESM, we knew that Germany wanted to expand it, but we did not know that it now wants it to be anchored inside the EU. Wolfgang Schäuble, the previous finance minister, was adamant that the ESM should not come under the wings of the commission. That position, too, seems to have changed.
The preliminary agreement also envisages strengthening the European Parliament to make the governance of the eurozone more democratic. On this point the German parties disagree with Mr Macron, who wants a separate eurozone parliament. Where Germany does support France is with an explicit call to strengthen anti-dumping policies and to impose a minimum corporate tax rate across the EU. Watch out for a big confrontation between France and Germany on one side and low tax member states such as Ireland on the other. The first pages of the agreement make welcome reading to those of us who have advocated more measures to make the eurozone less crisis-prone.
The preliminary agreement also envisages strengthening the European Parliament to make the governance of the eurozone more democratic The section on Europe clearly reveals the hand of Martin Schulz, SPD leader and a former president of the European Parliament. But how will this go down with your average SPD party activist? Does their enthusiasm about European integration outweigh their hostility towards Ms Merkel? The SPD rank and file are hostile to the chancellor’s leadership style and are infuriated by her tendency to adopt their policies and make them her own. The consensus view within the SPD is that the relationship cost them the election. Many, including the SPD’s youth organisation, want a period in opposition to regenerate.
I am no fan of grand coalitions, which end up strengthening extremist parties. Moreover, a new coalition would not be grand. It would have 56 per cent of the seats in the Bundestag, down from about 80 per cent last time. A new grand coalition might well be the last of its kind. Germany could become like the Netherlands, where it takes four or five parties to form a government.
Is this a price worth paying for a European agenda with an uncertain outcome? There is no guarantee that a joint Franco-German proposal for the eurozone would be accepted by all EU members. It would require formal treaty change, which itself must be agreed by all member states. France and Germany may start off with a coalition of the willing, and take it from there. The coalition deal made by the recently formed Dutch government names the exact opposite objective: no further strengthening of the eurozone. Can France and Germany really proceed without the Netherlands? Will the Netherlands change its views if Germany does? [...]
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