Angela Merkel's big political finale: ’s Presidency of the Council of the EU

(C) BRUNSWICK GROUP 2020 | 1 Strong leadership who has pushed European integration EUR 500 billion together with French needed for a stronger to the next level. Moreover, she will president , by be working closely with a trusted borrowing money on behalf of the Europe political ally, the ambitious EU Com- EU. Finally, the EU Commission’s The presidency of the EU council mission head Ursula von der Leyen, proposal worth EUR 750 billion was rotates every six months, meaning who served as a minister in Merkel’s approved by the that each EU member state takes cabinet for 14 years. under the title “Next Generation EU”, which will be linked with the MFF. on the responsibility every 13 years. This constellation has raised hopes Together, these recovery packages Each country holding the presidency especially in some southern and have a total financial firepower of then sets the agenda and drives eastern European countries that EUR 1.85 trillion. It will be one of the negotiation of compromises Merkel will soften her stance over Merkel’s most important and chal- between EU member states along- austerity policies. On the other hand, lenging tasks to finalize the complex side the President of the European however, German conservatives financial package. She needs to Council. While the presidency has from her own Christian Democratic change the minds of those member an important role in structuring the party appear minded to warn that states currently against giving away agenda, it is obliged to take on a Germany shouldn´t give away even their taxpayers’ money to poorer more neutral stance to facilitate more money to European institu- EU states, and to insist instead on negotiations. is one tions, and to countries deemed to a system of financial checks and of the few leaders who will take on have behaved in fiscally irresponsible balances, and the highest possible the role for a second time, from July ways. 1 to the end of this year – she was repayment rate. Merkel made clear And so – the stage for Merkel’s big also Chancellor back in 2007 when that brokering the recovery fund and political finale is set! We in Berlin Germany last held the position. Once the MFF is one of her top priorities. have put together a briefing on a again, Merkel’s aim will be to close Under her leadership Germany also few of the sectors and topics that as many negotiations on pressing wants to negotiate the future legal will be key over the next six months, issues as possible, which will be framework and regulations of the with a mind to helping companies essential if Europe is to emerge European structural fund, which will adopt and adapt their own positions effectively from the current crisis. be a key tool to stimulate the recovery and to engage in the wider political of the regions with new investment. Given the challenges Europe is debate. currently facing, the moment couldn´t As host and moderator of the be better for an experienced leader: budget negotiations, Merkel is in a will the EU hold together despite Financial Framework position where she will have to reach huge economic pressure from into her pockets to get an agreement. Near the top of the agenda for the Our bet, along with that of many COVID-19, growing populism and next few months will be the negoti- a yet unsolved migration crisis? Will commentators, is on a last-minute ations on the Multiannual Financial settlement. be executed by the end of the Framework (MFF), the EU’s seven- year with a well-sorted agreement, year budget for 2021-2027. Even or will the U.K. crash out without a in ordinary times, this has always Ensuring European deal? And will Europe be able to take proved a challenging task, with the digital sovereignity a more visible and powerful stance negotiations seeking to align the on geopolitical and technological different priorities of the 27 EU Besides the overarching financial issues with regard to the U.S. and member states, the Commission organization, digitalization will be at China? and the European Parliament. the heart of the German EU Presidency. In her final period, Merkel may act Merkel and her government need Faced with an ever-stronger U.S. more independently as she finds to manage some extra challenges, tech sector and the rise of China as herself in the unusual position of not particularly as the previous British the next digital superpower, the EU having to consider the usual tactical financial contribution is gone and has a clear priority: fostering Europe’s limits that politicians suffer from needs to be filled by others. The digital sovereignty. Germany when eying re-election: Merkel has post-COVID reconstruction of the wants to promote AI and quantum definitively ruled out running for a European economy also needs to technologies and lift the Franco- fifth term as Chancellor in the Federal be planned into the budget. German cloud initiative ‘Gaia-X’ to the European level. But the Chancellery Elections next year. Moderating the Merkel has already surprised her is careful to strike a balance between EU27 as the EU council presidency friends and foes in May of this promoting these technologies and will be her last big project, and she year by announcing the idea of a avoiding falling into protectionist wants to be remembered as a leader post-COVID EU recovery plan worth

(C) BRUNSWICK GROUP 2020 | 2 thinking. Reuniting the bloc behind a efforts. Transitioning to a sustainable offshore wind energy is another common understanding of what this economy remains one of the core crucial issue. Germany will seek means in practice will require long elements in Germany’s upcoming to establish European framework debates and negotiations. EU presidency. Merkel and her team conditions for the joint renewable are keen on driving forward the energy projects of the EU member Germany has aligned its program and explicitly states. closely with the subsequent Presi- set the UN 2030 Agenda for Sus- dencies (Croatia and Portugal) and tainable Development and its 17 set ambitious goals: establishing Shaping the future of Sustainable Development Goals European security standards on IoT (SDGs) as a guiding principle of the globalization and devices, creating EU-wide content German Presidency. moderation rules for Internet plat- Europe’s relationship forms, and reaching an agreement On 18 June 2020, Merkel reconfirmed with rivals and partners on European data privacy standards that Germany’s goal was to make which have been stuck in the Council Europe’s climate neutrality by 2050 The most difficult task here will be for more than three years. legally binding and to adjust the the Brexit negotiations with the targets for 2030 accordingly. Talks . Only during the The coronavirus outbreak in Europe about increasing the EU’s 2030 beginning of the presidency will it overshadows these plans. Some climate target face hurdles but need become clear if there will be a hard key issues have been pushed back to be finalised before the year is out. or a negotiated Brexit. The challenge towards subsequent presidencies, is that the British Government is not especially the comprehensive policy Approaches for achieving the newly being cooperative and has moved framework on Artificial Intelligence. set targets need to be found. In away from previously agreed Meanwhile, other topics emerged particular, the extension of carbon political declarations. However, on the radar such as demands for a emission pricing to all sectors and the German government insists on voluntary EU-wide contact-tracing the introduction of a moderate “a balanced relationship between system that reflects the bloc’s high minimum carbon floor price in the rights and obligations and fair com- privacy and cybersecurity standards. framework of the EU Emission petition conditions.” Trading System (ETS) shall be dis- And while Germany will be pushing cussed under German leadership. China will be the second overarching to reach its ambitious goals with- The question will be whether to put topic. The EU is far from having a in the Council, the Commission is more emphasis on reduction in the common China policy. While China gearing up in its fight against “Big sectors covered by the ETS or on is feared by many as a systemic Tech”. Competition Commissioner the so-called effort-sharing sectors rival and competitor, the country is has launched like transport and buildings. Many also a partner, not only due to the several antitrust and tax cases countries, including Germany, have sheer size of its market, but also against Amazon, Google, Apple and struggled to bring emissions down because of the need for cooper- co. The EU has also committed to in these areas, and Merkel has said ation on climate issues and WTO pushing ahead with a digital services that difficult negotiations would standards. Merkel has never given in tax, despite Washington’s efforts await on how to allocate responsibil- to the growing wave of anti-Chinese to block a global deal. Vestager said ities to the different member states. politics across Germany or at the would “really, really prefer EU level and is keen on maintaining a global consensus,” but will push In the energy realm, an important a proper balance, based on mutual ahead on its own, “if we need to.” subject for Germany’s Council Pres- interests. She has kept the door idency is hydrogen – a key element open for Huawei in Germany against Making the energy in decarbonizing European indus- strong external resistance from the transition a corner- try. The climate transformation of U.S. and in the Federal Parliament. industry is a core German interest. On the other hand, she has success- stone of the post- Therefore, Germany wants to press fully pushed to stop his COVID economic ahead with the creation of the 16+1 approach across Europe which necessary markets and infrastruc- has been splitting the EU. recovery tures for hydrogen within the EU. This shall spur investments into new The transatlantic boundaries be- Against the backdrop of the so- tween the EU and USA are still under called “coronavirus presidency”, technologies and make European companies a global leader in hydro- pressure. The German govern- climate and energy issues might ment has called the U.S. its “closest at first seem to play second fiddle, gen. As vast amounts of renewable energy are needed to produce green foreign and security policy partner but they are very much set to play a outside the EU”. Merkel believes in strong role in the pandemic recovery hydrogen, the rapid expansion of

(C) BRUNSWICK GROUP 2020 | 3 this partnership but has no illusions of the European Green Deal, the pressure from populist parties, about her shattered relationship SDGs and the significant financial causing them to react with tougher with President Trump. Until the U.S. firepower of the corona recovery investment legislation and regula- presidential elections in November, fund, which is linked to a sustainable tion. But – for Germany at least – there will be neither a new approach business approach, also represent these policies are more cosmetic on a bilateral trade agreement nor an enormous investment opportunity. than anything else. Governments hopes to strengthen international The new funding opportunities and ultimately want to facilitate inter- multilateralism or climate diplomacy. loosened EU state aid rules also national investment, so long as they The German presidency will take open more opportunities for busi- have sufficient oversight – not block that time to work towards an ambi- ness. it entirely tious climate diplomacy among the Besides this, there is already a And please also note: the German EU and its member states. Germany reinvestment in supply chains and presidency will put in place initiatives also wants to relaunch the EU’s production in the health sector. This for ensuring greater equality and policy and support the African includes a reset towards a more diversity in business. This will allow Continental Free Trade Area. sustainable agriculture and fishing companies with successful gender industry under the EU heading “Farm or diversity strategies to raise their Why corporates to Fork Strategy”, which Germany profiles as best practice cases. should engage will support in its presidency. Others will have to monitor closely how they can make their senior Beyond the headlines about growing management and board structures Europe knows it needs to strength- protectionism and Foreign Direct more diverse. en technology-wise to catch up with Investment controls, our impression U.S. and China and to avoid further remains that Europe continues to dependencies. Therefore, compa- be open to and keen on investment nies with promising technologies from abroad, especially after COV- – especially in the health, tech or ID-19. Of course, governing politi- energy sectors – can expect a lot cians in Germany and across many of political goodwill. The framework European countries are under

(C) BRUNSWICK GROUP 2020 | 4 The complex relation- ship of EU Institutions Executive Legislative and national member The sets the The European Parliament is policy agenda and consist of the co-legislator. It has 751 states the EU’s 27 national leaders. members, directly elected by The complex matrix made up of EU The EU citizens. Together with the proposes and implements leg- Council of the institutions and the competencies islation. It consists of 27 Com- (Council of Ministers) it reviews of national states is somewhat diffi- missioners, nominated by the proposals, amends them and cult to understand. Therefore, some European Council and approved eventually passes legislation. words of explanation: by the European Parliament. The European Council con- sists of 27 national ministers, The allocation of competences grouped by policy area. between the EU and the member states is defined by the EU treaties. The EU is solely responsible for monetary policy (for mem- bers), establishing competition rules; for trade and customs policy Judicial Financial and the conclusion of international The Court of Justice of the Eu- The agreements. Shared responsibility ropean Union interprets EU law maintains the stability of the exists in a number of areas includ- and settles disputes. There are euro and oversees the Eu- ing the internal market; agriculture, two courts with judges appoint- ropean financial system. Its the protection of the environment, ed jointly by national govern- President and executive board consumer protection, transport, en- ments. The European Court of are appointed by the European ergy, and research. Many decisions Auditors audits the EU budget Council. still lie with national governments and has 27 members, appoint- ed by the Council of Ministers. and parliaments, particularly on the details of the implementation of EU legislation or on matters such as national security and the protection of citizens.

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Contact: Ulrich Deupmann [email protected] (C) BRUNSWICK GROUP 2020 | 6