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Learning on the Job

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The EU is battling three major crises – with Germany in the lead in every case. But so far Berlin has not been able to create momentum for building a stronger Europe.

German Economy Minister Sigmar Gabriel (L), European Commission President Jean-Claude Juncker (2ndL), German Chancellor Angela Merkel (2ndR) and French President Francois Hollande attend a Franco-German digital summit at the Elysee Palace in Paris, France, October 27, 2015. REUTERS/Philippe Wojazer - RTX1TI33

© REUTERS/Philippe Wojazer

For the past five years Europe has been confronted with one fundamental crisis after the other – and each has pushed or pulled Berlin to the center of the Union’s response. When the sovereign debt crisis hit a number of member states in early 2010 and put the single currency under existential threat, Berlin unequivocally became ringleader. The German government has since been a key player both in crisis management and in reforming the euro area governance framework. Since 2014, Berlin, in cooperation with Paris, has also led the EU’s efforts to solve the Russia-Ukraine crisis. More recently, Germany has become a key actor in the EU’s struggle to find a common approach to the refugee crisis, which has been unfolding for years, but only recently reached the core of the EU with the influx of hundreds of thousands of mostly Syrian refugees. While Berlin came to lead the EU’s policy response on the sovereign debt crisis and Russia more by default than by choice, it was on the refugee crisis that the German Chancellor seized leadership most actively in summer 2015.

Over the past five years, the German government has gathered relevant experience in leading EU policy responses. However, the factors that made Berlin effective on previous occasions only partially apply to the current challenge of managing the refugee crisis and solving the underlying deficiencies of the EU’s functioning in Justice and Home Affairs. From partners to power resources and leverage, the conditions for Berlin’s leadership differ significantly between the three crises – and, so far, there seems to be little carryover from one to another. As a result, Germany’s ability to move things forward in Europe with any sustainability looks uncertain.

Leading with Weakened Partners

If there is a unifying theme across the three cases of German leadership, it is that the German government’s strength reflects the weakness of others. At other times and under different domestic circumstances, some of Germany’s partners would probably have acted earlier and more ambitiously to help tackle the problems confronting Europe. France, for example, has traditionally been more active on migration issues and the shaping of euro area governance than it has been over the past five years. The same is true for the UK, which is traditionally very forward-leaning on foreign policy and defense issues. Since 2014, however, it has been largely absent from the EU’s approach to the Middle East and Russia, including the management of the relationship with the United States.

In both cases, the inward-looking policy-making of the governments stems mainly from the rise of euroskeptical, anti-establishment parties that make it harder for the governments to strengthen joint European approaches and decision-making. In addition, the negative experience of the UK’s intervention in Iraq and Afghanistan has led to a more cautious British foreign policy. As far as European policy making is concerned, the rise of UKIP and its attraction to both Tory and Labour voters puts substantial pressure on the British government to accommodate euroskeptical positions, which Prime Minister David Cameron has translated into a pledge to renegotiate British EU membership before a referendum on this matter.

Meanwhile, in France, the Front National (FN) has established itself as a political force. Having adopted slightly more moderate rhetoric while maintaining its traditional right-wing populist positions, FN managed to come in first in the European elections in 2014 with almost 25 percent of the vote. And it is not just the big two that are struggling to drive policy in Brussels. Southern European member states such as Spain, Italy, and Portugal have been focused on dealing with the domestic aspects of the crises in the euro area, while some smaller states that have traditionally been stable and reliable partners of Germany and the Franco-German tandem at the EU level are dealing with more political fragmentation and volatility at home.

The political situation in Germany has been remarkably stable for the past decade. Angela Merkel has enjoyed uncontested political leadership since 2005, while extreme left- and right-wing parties have failed to get a foothold in national government. Of course, domestic constraints, both political and constitutional, have shaped Germany’s approach e.g. to the sovereign debt crisis, but have not turned the government or the vast majority of Parliamentarians into euroskeptics. The country’s relative economic strength and financial solidity is underpinned by socio-economic stability and the trade unions’ readiness to accept labor and wage policies which today still sustain Germany’s global competitiveness and low unemployment.

And yet Germany’s capacity to move things forward in Europe looks anything but certain, and in order to assess it, it is helpful to take a look at the conditions for leadership in each of the crises, in a broader European context and in terms of German power resources.

Veto Power in the Euro Crisis

In the eurozone, Berlin’s position as the largest guarantor of the rescue mechanisms, along with its powerful domestic veto players (in particular the German Constitutional Court), granted the German government an unparalleled degree of influence over EU policy decisions and thus domestic policy choices in debtor countries. The perception that the single currency faced an existential threat compelled Berlin take on financial and political risks that had seemed inconceivable just a few months earlier. But in exchange, Germany was able to set the pace and conditionality of financial aid. Though some governments, at least in certain phases of the crisis, were highly critical of European policy choices with obvious German fingerprints, the gravity of the situation left them with little alternative. Berlin was thus able to push for euro area governance reforms that, from its perspective, encourage member states to adjust budgetary and economic policies and bring the euro area back to the model of a currency union which Germany thought was enshrined in the Maastricht Treaty. At the same time, Germany had to accept higher risk sharing and financial solidarity, which has substantively changed the political economy of the euro area.

In the initial phase of the sovereign debt crisis, the German government worked with a coalition of northern and northeastern EU members, and a growing North-South divide seemed to be emerging. But as policies converged in countries struck by the crises and agreement widened that substantive reforms were indeed necessary, Rome, Madrid, and Paris lost their desire to oppose Berlin, not least because of the potential pressure of financial markets.

However, the absence of vocal and engaged political competition over policies and visions for a deepened EU has not proven to be a blessing for Berlin or Brussels. For instance, the continued absence of a strong French voice in European discussions about the future of the euro area has hampered the duo’s traditional ability to forge consensus and compromise between other EU member states. Certain essential policies over the past five years have displayed a French touch, including the creation of the European Stability Mechanism in 2010 and the increased focus on investment and growth under the Juncker Plan; however, there is little evidence of a broader Franco-German vision for the future of the euro area, and the EU institutions’ desperate efforts to push the debate on the euro area have not led to any substantive progress beyond the creation of Banking Union.

Tandem Still Functioning, Partly

In contrast, in the Russia-Ukraine crisis, Berlin is working closely with Paris in negotiations with the Ukrainian and Russian governments, with strong explicit or implicit backing of other member states, in particular Central and eastern European countries. In the so-called Normandy format France became Berlin’s key partner (replacing the initial Weimar Triangle approach that included Poland), despite Paris’s reputation of being traditionally less interested in Europe’s East. In recent weeks, France’s role has increased as its strategy towards Europe’s South and Southeast has taken on more importance vis-à-vis Russia. So, although initially conceived of as a tool to handle Ukraine-Russia, this format may turn into the EU’s most important format for developing a broader EU-Russia agenda, which must now include Syria and the wider Middle East.

In this regard, the traditional power of Franco-German cooperation, which finds its strength in their complementary perspectives and preferences, is playing out well. In most policy areas, a deal between Paris and Berlin alone no longer works as a suitable compromise for other member states’ interests; but on foreign policy issues, the countries’ approaches are still rather complementary. The test for the sustainability of this approach will be whether both Paris and Berlin manage to engage the other EU governments to maintain broader internal cohesion and strengthen the EU institutions.

This cooperation on the Ukraine/Russia crisis has been essential, as Berlin has nearly had its hands full just managing the relationship with Moscow and Kiev without the added burden of holding EU and transatlantic partners together. While the direct costs of the crisis have been comparatively low, the German economy has taken a considerable hit. German exports to Russia are estimated to plummet to €20 billion by the end of 2015, half the level recorded in 2012. This sacrifice bolstered Berlin’s credibility when asking European partners to maintain European unity on sanctions against Russia; however, the active role played by France was just as essential in reassuring allies, including Washington, that avoiding a hard power escalation was not tantamount to a betrayal of the West.

Missing Incentives

The leading role Germany has taken on in the refugee crisis, meanwhile, differs substantively from the roles it played in both the Russia and euro crises. When Berlin pushed other EU member states, in particular the eastern states, to subscribe to a quota system in response to the refugee crisis, the limits of Berlin’s power became obvious. With the refugee question, the German government does not have a veto to play, and non-action does not endanger the achievements of European integration as obviously. Germany could threaten to erect fences as other EU countries transport refugees to its borders, but this would mean that Germany would surrender its traditional preferences for open borders and free movement of people within the European Union. This leaves the government in Berlin with little leverage to coerce cooperation, in contrast to the euro-area crisis, when the risks attached to German non-action and non-commitment to financial assurance gave it powerful leverage over domestic politics in other crisis countries and the EU in general.

In handling the refuges crisis, Germany also lacks powerful, supranational allies. In various phases of the crisis in the euro area, the ECB and the European Commission pursued interests similar to those of Germany, paving the way for Germany to pursue its own policy approach. In the current crisis, however, there is no such international body to lay the groundwork beforehand.
There are also important differences between the three crises with regards to financial burden and risk sharing. While in the euro crises Germany took on financial risk and agreed to subscribe to a mutual insurance mechanism, the European Stability Mechanism, Germany’s willingness to take in a large number of refugees (up to one percent of its population in the year 2015 alone) is not seen as being an act of inner-EU solidarity, but rather as an attempt to exert moral leadership in the EU. And while they might admire Merkel’s liberal position, it puts some governments with little experience with immigration, especially in Central and Eastern Europe, in a difficult political situation. As a result, there is a rift between Berlin and the some of the countries that have been its closest allies in both eurozone policies and the Russia sanctions. The challenges Berlin has had to face to move other member states to share the refugee burden may grow even larger if Germany at some point starts asking for financial support from Brussels to help pay for the refugees in Germany.

Meanwhile, Germany’s approach to the migration crisis, which is domestically seen as very open and pro-European, has been viewed differently elsewhere in Europe. The government’s back and forth on the migration issue – initially taking a very liberal position and inviting Syrian asylum seekers from other EU member states, then re-introducing border controls when too many came – puzzled onlookers. First Berlin seemed to have abandoned the Dublin convention, which requires that refugees only apply for asylum in the first EU country they enter, with its invitation. Then it seemed to be violating the Schengen Agreement of open borders by reintroducing controls. This led a number of political leaders and journalists to question Germany’s commitment to European integration and agreed norms and rules. This is a tricky point: in the euro crisis, and particularly with regards to Greece, Berlin seemed to hold rigidly to a “rule-based approach” for fellow member states struggling with debt and recession – and this even after Berlin had previously bent these same financial rules, such as when it pushed for a non-application of the Stability and Growth Pact in 2002/03, and then its eventual reform. It is thus not hard to see how smaller and medium-sized EU member governments could get the impression that Berlin can pick and choose when the rules matter, and that a large country’s power overruns the rules and laws of EU governance.

Germany’s leadership in the refugee crisis is still young. And it is still very unclear where Merkel’s policies will lead, both domestically and on the EU level. In its early stages though, this newest crisis reveals cracks in Berlin’s leadership position in the Union since its moral authority has yet to translate into much substantive movement on the European level and left Berlin struggling to find powerful allies.

Complex Search for a Role

At a time when the European Union is facing unprecedented internal challenges and controversy, external aggression, and global change, Germany is still adapting to being the most powerful and ambitious country in the EU, and to the criticism and reactions that such a position brings. And domestically, Berlin is also still in the process of defining what leadership can and should mean. Germany’s old habits are being challenged, as are its assumptions on close cooperation with allies and friends. It is becoming increasingly clear that the United States, at least for the near future, cannot and will not help as it used to when Europe was faced with serious security challenges, while Germany’s European allies, in particular large member states like France, the UK, and Italy, are mostly preoccupied with domestic challenges. It is still unclear whether we are currently witnessing a learning phase, in which Germany will discover how to use its power resources in a complex setting of insecurity and competing objectives and stabilize the EU as a framework for rules-based action, or whether Berlin is doomed to failure given the difficulties of systemic and domestic conditions.

The complexity of Germany’s search for a role in the EU is illustrated by the fact that, in the three crises, its leadership has not followed a consistent pattern, neither in terms of partners nor with regard to power resources and impact. While for decades the starting point of European initiatives was generally a powerful Franco-German approach, Berlin is now working with different coalitions of member states depending on the policy areas. This requires agility, as well as intense and diverse investments in bi- and multilateral relationships in the EU, particularly as coalitions forged in certain policy areas do not work in others; countries that were with Germany on austerity in the eurozone and a hard line on Greece, for example, were fiercely against Germany on accepting refugee quotas. Despite the indisputable achievements of the recent years, the accumulation of crises and the patchwork of interest coalitions across issue areas indicate how potentially limited German leadership in the EU might be if it cannot partner with large countries or a stable group of smaller member states across policy areas.

In 2010 the German chancellor questioned the role and impact of supranational institutions in crisis management and the big issues of EU policy making in her speech in Bruges, pointing to a future “Union method” based on intergovernmental cooperation over a “community method” led by EU institutions. However, deliberate coordination with the EU institutions may prove the method of choice for the future. Germany’s suggestion to strengthen the European Commission’s role in the surveillance and coordination of member states’ economic and budgetary policies is one example of this. The German foreign minister has also been explicit in lending support to EU High Representative Federica Mogherini, who has just completed her first year in office. To make progress in addressing the refugee crisis and improving the EU’s governance in Justice and Home Affairs, large countries like Germany will need to work closely with the supranational EU institutions, in particular the European Commission and the European Parliament. Both institutions are important as venues for secondary law making. In addition, the European Parliament can play an important political role, leveraging its role as a forum for trans-European debate with trans-European party structures, which can be used to further trans-European consensus building.

Investing in Power

In terms of power resources, Germany’s ability to impact EU decisions has proven strongest when others need it to act to protect core achievements of integration (such as the euro) and it has a credible narrative about domestic veto players that limit its flexibility. Where it lacks a credible threat, such as on refugee quotas, it has not been very effective. An alternative to coercing through threats would be persuasion through incentives; but to date, Germany has not successfully implemented incentive structures in the EU that would improve its leadership capacity.

In order to build and maintain leadership capacity in other policy areas, Germany will need to invest in EU capacities in two ways. First, it will not be able to drive EU efforts forward unless it continues to take on a large share of the burden of joint solutions, in particular as a number of member states, including Greece, Spain, and Portugal, as well as Italy and France, are still recovering slowly from the financial and economic crises of the past years. This does not mean that the German government cannot also help build European solidarity mechanisms from which it may eventually benefit itself – for instance for sharing the costs of handling the refugee crisis, or for strengthening crisis resilience in the euro area. In fact, as the influx of refugees continues to put stress on Merkel, Berlin may need to make the case at home that the EU also helps Germany cope in order to maintain public support.

Secondly, the German government will have to invest in building trust, consensus, and coalitions. As the back-and-forth in the refugee crisis or Germany’s pressuring of Greece have shown, any surprise move from the German government risks being interpreted as a manifestation of self-interest and a misuse of its power position. Building and maintaining partnerships and coalitions will require more time and consistent political effort than Berlin has been investing. Germany, as the most powerful country, will likely also need to resort to issue-linkages and cross-policy deals, for instance to keep closed ranks on Russia or to find compromises on the migration issue.

Meanwhile, German policy-makers and the German public will need to learn how to deal with criticism without dismissing it as a natural side effect of a leadership role. Since the financial and economic crises hit the eurozone eight years ago, Germany’s role in Europe has been vehemently criticized; Germany has been accused of shirking responsibility, obstructing progress, and leading in the wrong direction as it suits national preferences. Policy-makers in Berlin need to get better at engaging with their critics, and even learn from them when trying to tackle European challenges.

Since 1946, and in particular since regaining full sovereignty as a nation state, Germany has always defined its European and international role as part of a European and international order that is bound by treaties, secondary law, and EU decision-making procedures. But for German citizens and next-generation leaders, Europe has become a matter of choice, not an obligation grounded on historical memory and shame. This is where the largest domestic leadership challenge for the government emerges. Voters today need more convincing.

This is an especially important task in the face of the refugee crisis, which, for Germany, is a huge socal and political challenge with the potential to destabilize Germany politically. The government will need to balance its liberalism on asylum policy, which is enshrined in the German constitution, and the capacity of its administration, civil society, and policy-makers to actually handle the practical, political and security challenges that come with the current inflow of refugees. In order to maintain Germany’s pro-European stance and its openness to globalization and internationalization, the refugee crisis must not lead to the perception of a loss of control, rising insecurity, or the return of identity issues.

A domestic political crisis leading to further polarization and possible political instability would endanger Germany’s support for European integration. The effects of this would be enormous – not only for Germany, but for Europe as a whole.