Can France and Germany steer Europe to success? Annual Report 2019 THE CER IN JULY 2019 About the CER FROM LEFT TO RIGHT, TOP TO BOTTOM: John Springford, The Centre for European Reform is an award-winning, independent Ian Bond, think-tank that seeks to achieve an open, outward-looking, Agata Gostyńska- Jakubowska, influential and prosperous European Union, with close ties to its Sam Lowe, neighbours and allies. The CER’s work in pursuit of those aims is Nick Winning, guided by the same principles that have served us well since our Peadar Ó hÚbáin, Kate Mullineux, foundation in 1998: sober, rigorous and realistic analysis, combined Bea Dunscombe, with constructive proposals for reform. Beth Oppenheim, Sophie Horsford, The CER’s reputation as a trusted source of intelligence and timely analysis Jordan Orsler, of European affairs is based on its two strongest assets: experienced and Charles Grant, respected experts, plus an unparalleled level of contacts with senior figures Camino Mortera- in governments across Europe and in the EU’s institutions. Since the UK’s Martinez and Luigi referendum on EU membership we have reinforced our networks in Scazzieri Europe by opening offices in Brussels in January 2017 and Berlin in October Absent from the 2018. The diverse perspectives and specialisations of our researchers, half photo: Sophia Besch, of whom are from EU-27 countries, enhance the quality and breadth of our Rosie Giorgi, Christian analysis of European politics, economics and foreign policy. Odendahl, Khrystyna Parandii and Emma Roberts The CER is pro-European but not uncritical. We regard European integration as largely beneficial but recognise that in many respects the Union under- performs, at home and beyond its borders. We look for ways to make it work better and then promote our ideas through publications, the media and various forms of direct engagement. The CER’s audience ranges from European politicians and officials, to journalists and the wider public who want to know more about the EU and its activities. The CER believes it is in the long-term interests of the EU and the UK to have the closest economic and political relationship that is compatible with the political realities. We follow closely the trials and tribulations of the eurozone and the European economies, as well as the EU’s single market and its energy, climate and trade policies. We also study the Union’s foreign, defence and security policies – including relations with its neighbours, and with China, Russia and the US; its approach to refugees and migration; co-operation on law-enforcement and counter-terrorism; the functioning of the EU’s institutions; and the state of democracy in Europe. Since the British referendum, the CER has played an active part in developing viable and practicable proposals for the UK’s future relationship with the EU. ANNUAL REPORT 2019 January 2020 3 [email protected] | WWW.CER.EU Can France and Germany steer Europe to success? by Charles Grant Since its foundation in the 1950s, the EU has seldom been free from ABOVE: trials and tribulations. But the past few years have been particularly Charles Grant challenging. The club is surrounded by strongman leaders who spurn its liberal internationalist values and disregard its preference for a rules- based order – Donald Trump, Vladimir Putin and Recep Tayyip Erdoğan. The first two would happily see the EU disintegrate. The EU also has to contend with the growing geopolitical and economic heft of China, whose autocratic leader, Xi Jinping, professes respect for global trading rules but shares few European values. Some of the EU’s own governments play fast and influential member-states, is finally leaving the loose with the rule of law – most egregiously EU, three-and-a-half years after its referendum. in the case of Hungary, but in several other members, too. Beyond the Union’s boundaries, Faced with these and many other difficulties, several parts of the neighbourhood are unstable the EU needs to develop a steely resilience. and combustible. The refugee and euro crises, Part of the answer is creating the conditions though less acute in 2019 than in previous years, in which economies can innovate and grow, still fester, with the potential to poison relations while regional disparities are curbed. Another among the member-states. Europe’s economy part is coping effectively with major problems needs to adapt to rapid technological change like migration and climate change. The EU also while finding ways of drastically curbing carbon needs to be firmer with member-states that emissions and overcoming worsening regional show a lack of respect for the rule of law. It disparities. And the UK, once one of the most needs a new and better policy for stabilising its neighbourhood that does not depend solely The Maastricht treaty – negotiated in 1991 – on the offer of accession (French President was in some respects the fruit of this formula. Emmanuel Macron’s penchant for concentric Mitterrand got Kohl to accept economic and circles or gradations of EU membership may monetary union (EMU). Kohl made Mitterrand offer a way forward). And Europe must find sign up to EMU on German terms, with an the capacity to unite on the big geopolitical independent central bank, and also accept the challenges that it faces, such as how to handle (ill-defined) concept of political union. One the US, China, Russia and Turkey. element of this delicate compromise was France acquiescing in German reunification in 1990. Finally, Europe needs effective leadership, which has been sorely lacking in recent years. The But towards the end of the first decade of this EU institutions do their best, and quite often century, the Franco-German tandem became propose sensible policies. Ursula von der Leyen, troubled, and in some ways less influential. First, the new Commission president, has made an the EU enlargements of 2004-13, which brought ambitious start, saying that she wants to run in the Central and East European countries a more “geopolitical” Commission. However, (CEECs), diluted the combined clout of Paris the key member-states are unwilling to let the and Berlin. A German-French accord was still institutions lead Europe’s responses to the most necessary but no longer sufficient for the EU to pressing strategic challenges. The European move forward. Paris and Berlin might well agree Commission enjoyed a golden age in the time of on what the EU should do, as they have done, for Jacques Delors, who was president from 1985- example, on responses to the refugee crisis or to 95, but the political climate is now much more climate change, but the Central Europeans could favourable to ‘inter-governmentalism’. take a different view and block a common EU line. Second, there was a problem of imbalance. With In an increasingly lopsided relationship, German reunification, Germany became the much larger leaders“ started to lose respect for the French. The partner, but so long as the French economy performed relatively well, the disparity was arrival of Macron promised to rectify this. not too serious. Then from around 2005, the ” year that Angela Merkel became chancellor, Throughout the EU’s history, France and the German economy powered ahead, while Germany, often acting together, have provided France’s struggled, especially after the financial backbone and stability, and their relationship crisis. Then in 2010 came the euro crisis, on is the focus of this essay. There were periods which France and Germany took diametrically of great amitié, as when the couple were led opposed views, and which catapulted the by Charles de Gaulle and Konrad Adenauer, biggest creditor country, Germany, into a Georges Pompidou and Willy Brandt, Valéry leadership role. As a result of that and of her Giscard d’Estaing and Helmut Schmidt, François diplomatic skills, Merkel gradually became Mitterrand and Helmut Kohl, and Jacques Chirac Europe’s pre-eminent leader. No major deal and Gerhard Schröder. could be brokered at the European Council without her involvement. Nicolas Sarkozy There have been occasional rough periods, too. had considerable energy but flitted about all The arrival of Tony Blair as British prime minister over the place, while François Hollande (who in 1997, for example, disrupted the couple – on became president in 2012) said rather little in winning office in 1998 Schröder made his first the European Council. Merkel’s political standing visit to London, not Paris. There were several in Germany became ever stronger, while the years of a London-Berlin love-in before common domestic position of French presidents often agricultural interests and opposition to the Iraq looked shaky. In an increasingly lopsided War brought Paris and Berlin back together and relationship, German leaders started to lose into conflict with London. respect for the French. When the tandem works well, the formula has The arrival of Macron, elected in May 2017, tended to be the same: because France and promised to rectify these imbalances. Macron Germany have such divergent interests, are displayed a Sarkozy-like energy but seemed to governed so differently and disagree on so many be more focused and effective in implementing issues, they have known that if they can find a his ideas. His strategy was to push through common approach, it is likely to work, not only economic reforms in France, get the economy for them, but for most of the EU. Traditionally, growing and thus win credibility with the the two go on negotiating, if necessary at Germans – who would then buy at least some of great length, until they reach a compromise. his ideas on eurozone reform. ANNUAL REPORT 2019 January 2020 5 [email protected] | WWW.CER.EU Part of this plan worked. Macron did pass more by a slowdown in manufacturing demand ABOVE: reforms than his predecessors, for example and trade around the world.