European Union

Can the Franco-German motor propel the EU once more?

BY Leopold Traugott   /  13 April 2018

The idea of a concerted Franco-German push to drive forward European integration is the dream of some, and nightmare of others. With the election of French President Emmanuel Macron last year, followed by the inauguration of Germany’s pro-European ‘Grand Coalition’ several months later, many thought it was becoming reality.

Hold your horses. It is true that Macron has delivered new vigour to the European debate and has brought France back into the vanguard of Europe’s reformist powers. By standing on a platform to reform France’s domestic economy, he defied those critics constantly arguing that Paris should get its own house in order first before pushing for European solidarity or reforms.

Macron has done most things right from a German perspective. Still, it seems unlikely that he will get most of what he wished on EU reform for in return.

The German government knows that it needs to work with Macron on reforming the EU and, perhaps most importantly, the Eurozone. Its coalition treaty explicitly engages with some of his ideas, such as the European Monetary Fund or harmonised corporate tax rates.

But beyond the flowery language, Berlin’s red lines have not moved too much on many crucial Eurozone reform issues. It is still deeply sceptical of putting its taxpayers’ money on the line for mutualised debts, for example.

The Social Democrats, who entered the German coalition waiving their European banners, behave more fiscally conservative than expected and focus much of their attention on their own party’s domestic future. And even where Merkel would want to strike a deal, the more conservative branch of her party has clipped her wings.

Northern EU member states largely share Berlin’s worries over deepening the Eurozone. For many years, smaller fiscally conservative countries within the EU could hide behind the UK, trusting that London would reject any Franco-German proposals that were deemed too federalist. With the British soon out of the equation, these countries must now group together and find their own voice.

That they were able to do so, they proved in March. Eight northern EU member states penned a letter in opposition to some of Macron’s proposal, warning that Macron’s “nice to have” reforms must not divert attention from the “need to have” reforms that really matter.

Nearly one year after Macron took office, some of his more colourful reform ideas are dead already. The proposal for a Eurozone finance minister controlling a large budget is off the table for the foreseeable future and plans for a slimmed-down European Commission or transnational lists for the European Parliament as well. So much for those “nice to have” reforms.

For other reforms, there is luckily still hope. Open Europe analysed what some of these key reforms may be in a recent briefing, “The rocky road ahead for the Franco-German reform drive of the EU.”

There is general support for the idea of transforming the European Stability Mechanism into a European Monetary Fund. Entrenched divisions over what its final shape and tasks should be mean its completion is still a long way off. But these differences aren’t insurmountable. The same is true for the completion of the Banking Union.

On some reform areas, creative solutions may work best.  Following France’s realisation that a European military intervention force is unlikely to work under the EU’s Permanent Structured Cooperation (PESCO), it now seeks to establish the force outside of EU frameworks. While this is not necessarily the best sign for the EU’s aim to become an independent security actor, it facilitates defence cooperation with UK post-Brexit and may be a positive contribution to European security overall.

It has never been a secret that French and German attitudes towards the governance of the Eurozone are substantially different, in particular regarding the balance between risk-sharing and risk-minimising among its members.

Macron has now upped the ante. He has presented a coherent vision for Europe’s future, which – even if you may argue about the benefits and drawbacks of individual proposals – provides a logical and constructive step forward.

Germany’s new government, despite its pro-European rhetoric, so far has failed to engage properly.  It is unwilling to fully support Macron, which is based on a deeply integrated Eurozone at the heart of a wider, looser EU.

But it also has not come up with its own counter project. Where Paris provides a vision, Berlin can only offer a vacuum of ideas.

To drive the EU forward, Paris and Berlin will need to see eye. Only together will they be able to convince the other 25 member states – some sitting closer to Germany, some to France – to agree to significant reforms. And reforms are necessary indeed.

If Germany cannot reach a compromise with the most pro-European French President in decades, then with whom could it?

Leopold Traugott is a policy analyst at Open Europe