Sun. Feb 5th, 2023


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EU dealt hammer blow as new German Chancellor tipped to ignore bloc: ‘Sudden realisation’

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Brexit will have 'consequences' for the UK says Olaf Scholz

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Germany’s new Chancellor has yet to be announced, but Olaf Scholz, the Social Democratic Party (SPD) candidate who won September’s election is in pole position for the job. He moved a step closer to succeeding Angela Merkel last month after the Greens and the Free Democrats (FDP) announced their readiness to enter formal coalition talks. The Greens found themselves in the so-called ‘kingmaker’ position after having placed third in the election with 14.8 percent, while Mrs Merkel’s Christian Democratic Union (CDU) came second and the FDP came fourth.

Talks make the prospect of a centre-left government replacing the centre-right-led one, which has been in power in Germany for 16 years, more likely than ever.

The EU will be keeping a close eye on events that unfold in the coming months, given Germany’s relationship with Brussels.

Much has been said of the country’s future position in the bloc given Mrs Merkel’s leading and influential role — spending 16 years shaping both German domestic politics but also guiding the EU to become what it is today.

While some argue that Mr Scholz will pick up where Mrs Merkel left off, others claim that the current finance minister will turn his eye away from Brussels and focus instead on Germany.

In a comment and analysis piece for Euro Intelligence last month, journalist Wolfgang Münchau wrote that those who hope that Mr Scholz will bear the torch of EU reform may be disappointed.

He said the expectation in Europe is that the new government will be lax on fiscal policy and support reform of the stability pact, that it will champion the completion of a banking union and the capital markets union, and also turn green and digital.

Most importantly, he said that Europe will be hoping that Germany drops a “foreign policy strategy that coddles dictators, and becomes a champion of European strategic autonomy.”

He claimed, however, that this is far from the likely outcome, as Mr Scholz and his new coalition are expected to “focus on domestic investment, not EU reform”.

Mr Münchau wrote: “Perhaps most disappointing for the other Europeans will be the sudden realisation that Olaf Scholz is as fiscally conservative as his predecessors, Wolfgang Schäuble and Peer Steinbrück, the social democrat who brought us the debt brake.

“A plausible finance minister for a traffic light coalition will be Christian Lindner, FDP chairman and fiscal hawk.

“Lindner is even opposed to the idea of European deposit insurance, a subject that would fall under his portfolio.

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“Neither Scholz, nor Lindner, nor the Greens will spend their political capital on the reform of the European stability pact.

“Since they regard the debt brake merely as the national implementation of the EU’s stability rules, their decision to observe the debt brake in full would give them little leeway for reform.”

He argued that a new German government that is likely to run a tight fiscal policy at home “cannot afford” to “allow deficit overshoots elsewhere in the euro area”.

Europe was not a subject in the German election campaign — with most, if not all, candidates focusing their attention on internal affairs.

Mr Münchau noted: “The decade for EU reform would have been the last one, the decade when Europeans deluded themselves into thinking that the European stability mechanism constituted a sufficient response to the euro area’s multiple governance problems.

“That opportunity was missed for reasons I have written about many times.”

He added: “This decade will be about digitalisation and green investment.

“By the time the EU agrees on a banking union and capital markets union, we may find that crypto-finance will be so developed that the notion of a banking union and even of banks themselves sounds old-fashioned.

“Technology runs at a faster pace than European reform.

“I suspect that Germany will see its future as a junior technology partner for China, while pretending to be a loyal ally to the US and a good European at the same time.”


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If Mr Scholz doesn’t take up Mrs Merkel’s role within Brussels, other European leaders may move to step up to the mark.

French President Emmanuel Macron has been widely seen as co-leading the EU alongside Mrs Merkel, and reports and analysis suggest he might look to perform a power grab at the helm of the bloc.

However, Dr Alim Baluch, a professor who specialises in German politics at the University Bath, claimed the Frenchman does not have a position of power waiting for him in Brussels.

Asked if Mr Macron would now be seen as the de facto leader of the EU, he told “No — Macron will continue the very tight Franco-Germany alliance, and that has always been very powerful.

“The alliance will become even more important because of Brexit, and maybe this will get on other countries’ nerves.

“Maybe Germany and France together have to find a third country — Italy has a big economy and a lot of people.

“So, maybe the rest of the EU feels dominated by the Franco-German alliance and that might, going forward, be a problem.

“Germany is very happy for France to pretend that they are more influential than they are and to have shrill messages when they bark at smaller countries or the UK.

“France wants to punch above its weight and Germany says, ‘Yes that’s great, go ahead.'”

Meanwhile, Mr Scholz accompanied Mrs Merkel to the COP26 summit in Glasgow this week.

Photographs showed him in all of Mrs Merkel’s meetings with world leaders — with many describing it as a “historic” gesture.

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