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Home , Andrea Nahles, Heiko Maas, Jens Spahn, Peter Altmaier, Richard Grenell

Letter from

Europe’s “Humiliation”

By Klaus C. Engelen

n times of global upheaval, talk- power issuing orders than those of a As Europeans continue to strug- ing about new faces in govern- diplomat in an allied country.” gle with the trade war threat under ment and other institutions from A timely YouGov survey, com- Trump’s banner of “America First,” Ia European capital may be more missioned by the American Council the emerging deeper implications of relevant than in quieter times. This is on and Atlantik-Brücke, Trump’s decision to pull out of the especially the case for Germany and found that “about half of the respon- nuclear deal with Iran and impose its political center Berlin, which fac- unilateral secondary sanctions on es relentless assaults from a new U.S. “It sounded more like European companies and banks are president. The way the German polit- the words of a colonial power causing deep economic uncertainties, ical, economic, and cultural elite that issuing orders than those of challenging European governments was brought up under the postwar to protect their companies and banks. “Pax Americana” feels these days is a diplomat in an allied country.” Merkel presides over a coalition captured very well in the forthcoming between her conservative Christian issue of magazine: “With dents are convinced that the founda- Democratic Union/Christian Social his decision to blow up the Iran deal, tion of common values is eroding” Union and the center-left Social U.S. President Trump has thrown (see box). Democrats, in which key ministries Europe into uncertainty and anxiety German Chancellor Angela such as finance and foreign affairs … Trump has humiliated Europe Merkel—now beginning her fourth went to the Social Democrats. to a greater degree than any U.S. term—and her new Never before in German history president before him … To complete government team with many new have two large governing parties been Europe’s humiliation, Trump’s new political faces are confronted with led by women. The new SPD leader U.S. ambassador in Berlin, Richard a breakdown of the postwar inter- is , 47, who joined the Grenell, sent out a tweet this week national world order. Most of them, party at the age of 18, had a spectacu- demanding that German companies on both sides of the party spectrum, lar party career, and became the first immediately begin winding down hope that the new American presi- their operations in Iran. It sounded dent has served as the great unifier of Klaus Engelen is a contributing more like the words of a colonial Europe. editor for Handelsblatt and TIE.

6 The International Economy Spring 2018 Letter from Berlin

United Kingdom—the so- called G-3—sort out with Iran New Jobs, New Faces and the other signatory states such as and how the comprehensive plan of ac- tion can be saved, Maas will meet his first test by fire. With respect to transat- lantic relations, Merkel and Maas are changing some im- portant positions. This sum- mer, Peter Wittig, the long- time German ambassador in

Su s ie Knoll MSC / Kuhl m ann Washington, will move to Andrea Nahles is The SPD’s Heiko Emily Haber will London and be replaced by the first woman to Maas is now become the first Emily Haber, the first wom- lead Germany’s Germany’s minister woman to serve an to represent Germany in Social Democrats. of foreign affairs. as Germany’s the U.S. capital. In her long ambassador to the diplomatic career, Haber has . been stationed in Moscow and Ankara, but also was po- sitioned in the Berlin interior ministry where she worked with the intelligence services and on the Iran nuclear deal. There is a new German finance minister on the European and international stage, appearing at meet- ings of the Eurogroup, the International Monetary Fund,

Do m ini k Butz ann O laf Ko s in sk y and the G-20 summits. Olaf will Annegret Kramp- Scholz, the former mayor serve as both is the new economy Karrenbauer is of Hamburg who served as finance minister minister and the new secretary labor minister in Merkel’s and vice chancellor. Merkel’s general of the CDU. first grand coalition between “Mr. Fixit.” 2007 and 2009, can be con- sidered the most powerful cabinet member in the new administration. He succeeds women at the helm of the SPD in the assume major international roles. Wolfgang Schäuble, controlling the party’s 155-year history. The SPD’s , 51, who federal purse and also serving as Instead of entering the Merkel served in the previous grand coali- Merkel’s vice chancellor. cabinet, Nahles took the role of par- tion as justice minister, took the A former labor lawyer, Scholz liamentary leader in the . foreign ministry with little diplo- is considered the most experienced In this position, she hopes to have matic experience or foreign rela- and respected SPD cabinet member. more room to concentrate on win- tions background. Coming from For example, he successfully negoti- ning back working-class support the federal state of next to ated the new Länderfinanzausgleich, after the party recently suffered the the French border, he has a record that is, the fiscal equalization agree- worst election results in its history. as a strong defender of European ment between rich and poor states On the SPD side, two new integration. In the coming days and in Germany. Taking his new posi- members of Merkel’s cabinet will weeks, as Germany, , and the tion, Scholz made clear that on the

Spring 2018 The International Economy 7 Letter from Berlin

Transatlantic Alliance in Question

uring the postwar decades, the American Council in these institutions, while one in three has little or no on Germany and the Atlantik-Brücke have been confidence. Dplatforms for strengthening transatlantic relations. The findings of the survey underline that official rela- One of their historic achievements was to mobilize tions between Washington and Berlin have cooled since the American assistance in the difficult process of German election of President Trump. Chancellor ’s unification against considerable obsta- recent visit with Trump was described cles. “The transatlantic partnership is While more than two-thirds of in Der Spiegel as “not so bad”—an in- indispensable in tackling today’s com- dication of how low expectations were. mon challenges, but we must focus on Germans are pessimistic about When it comes to important shared issues that impact citizens in both of the prospect of a free trade values, ranked high- our countries,” says Council Chairman agreement, more than a third of est in both countries. For Germans, the John B. Emerson, who served as U.S. other top shared value was ambassador to Germany. Americans believe that such an (56 percent), privacy (33 percent), and At a recent conference in agreement will come about under the rule of law (32 percent), and for Washington, the American Council the Trump administration. Americans freedom of religion (38 and the Atlantik-Brücke released a percent), democracy (36 percent), and survey conducted by YouGov in the the right to bear arms (30 percent). United States and Germany on the current challenges in Two-thirds of respondents want transatlantic relations the transatlantic relationship. Key findings include: to remain as they are or to become closer. Only German voters for Party (32 percent) and the AfD (21 per- n The majority of Germans and Americans believe in cent) are against close transatlantic exchange. common Western values. However, about half of the re- The findings on the hot trade issues are especially spondents are convinced that the foundation of common interesting. While more than two-thirds of Germans are values is eroding. pessimistic about the prospect of a free trade agreement n one in five Germans does not think that Europe and the between the United States and Europe under the current United States share the same values. administration, more than a third of Americans (36 per- n germans and Americans agree that key common chal- cent) believe that such an agreement will come about under lenges are the fight against terrorism and climate change the Trump administration. Republican voters are particu- n one-third of Americans are optimistic that a free trade larly optimistic at 53 percent. agreement between Europe and the United States will More Americans than Germans feel that China pos- be concluded under the Trump administration. Only 14 es a threat in terms of economic growth and security. percent of Germans share this view. Americans feel more threatened by (44 percent) n Both Germans and Americans have a declining trust in than do Germans (35 percent). democratic institutions. Only one in five is confident —K. Engelen

domestic budget front and in the austere tradition of his thrifty CDU euro area members should they get Eurogroup when it comes to euro predecessor were disappointed. into a crisis. area rescue missions, he prefers to Also, Scholz is talking about bal- follow the fiscal conservative poli- ancing the budget and reducing Keeping key experts cies of Schäuble, the CDU veteran structural deficits, but—according By naming Jörg Kukies, the co-head who moved to become speaker of to the Grand Coalition agreement— of Goldman Sachs in Germany, as the Bundestag. he indicated that Germany, as the state secretary in the finance ministry, Those who hoped that largest European economy, would Scholz met criticism from within his Germany’s new Social Democratic be ready to come up with more fi- party, although the investment bank- treasury chief would break with the nancial support for the southern er is a long-standing SPD member

8 The International Economy Spring 2018 The Magazine of international economic policy 220 I Street, N.E., Suite 200 Washington, D.C. 20002 Phone: 202-861-0791 • Fax: 202-861-0790 Letter from Berlin www.international-economy.com [email protected] and was active in the SPD youth or- European department, and Levin 59, the new economy minister, ganization. In an effort to not rock the Holle, who came from Boston will play an important role on the boat, Scholz left key experts in their Consulting, will stay at the helm of European and international stage. He positions. Ludger Schuknecht, the the banking and financial market was the first German official whom finance ministry’s chief economist, department. who came from the European Central Leaving some experts in their German Chancellor Bank to the ministry some years ago positions didn’t mean that Scholz— Angela Merkel and her new and who also acted as sherpa for the also serving as vice chancellor— G-20 summits, was asked to stay. neglected putting his own people in Grand Coalition are confronted Since Berlin’s finance ministry key positions in the ministry. No less with a breakdown of the postwar must cope with a pressing European than 41 new positions were filled in international world order. agenda and neverending challenges the new Scholz finance ministry. in banking and financial markets reforms, Scholz retained key depart- Merkel’s Mr. Fixit Chancellor Merkel dispatched to ment heads. Thomas Westphal was In Merkel’s conservative party camp the United States to try to sway the asked to remain at the helm of the in the new cabinet, Peter Altmaier, U.S. administration to rethink plans to impose tariffs on steel and alumi- num imports. The dubbed him “Merkel’s factotum and all-purpose Mr. Fixit.” No wonder “Colonial Decree” the CDU/CSU majority in the coali- tion hopes that Altmaier will be able hen Richard Grenell, to give the economic affairs min- President Trump’s new am- istry—including its international Wbassador to Germany, a dimension—a higher profile than it few hours after getting his accredition, had under SPD ministers. As head of tweeted: “As @realDonaldTrump said, the chancellery from 2013 to 2017, US sanctions will target critical sectors Altmaier was at the center of efforts of Iran’s economy. German compa- to cope with the 2015–2016 refugee nies doing business in Iran should wind crisis. He became acting interim fi- U.S. Ambassador down operations immediately.” For some nance minister after Schäuble took to Germany German ears, this ultimatum from a U.S. his new position as speaker of the Richard Grenell diplomat sounded like a colonial decree. Bundestag. Grenell’s tweet caused Wolfgang Talking about new faces with Ischinger, who chairs the prestigious an- potential for higher office, there nual Munich Security Conference, to re- was a signal from Merkel when spond, “Ric: my advice, after a long ambassadorial career: explain she presented Annegret Kramp- your own country’s policies, and lobby the host country—but never Karrenbauer, 55, the successful tell the host country what to do, if you want to stay out of trouble. governor of the state of Saarland, Germans are eager to listen, but they will resent instructions.” Andrea as new CDU secretary general with Nahles, who leads Merkel’s coalition partner, the Social Democrats, a mission of renewing the party. assumed that “Grenell needed a bit more coaching in diplomacy.” A Another challenge comes from the Left Party spokesman reacted to Grenell’s threat by asking young populist, , 37, the German foreign ministry “to call in the new U.S. ambassador.” whom Merkel under pressure from In his tweets, Ischinger asked, “Is the transatlantic alliance the party made health minister in dead? If one side refuses to even consider the arguments presented her new cabinet. The big question by the other side: are we still together, as we try to manage chal- remains whether Nahles, as new lenges to our shared security interests? Or are we now drifting apart SPD leader, will be able to rejuve- for good? Sad questions!” nate her party and might become, —K. Engelen like Finance Minister Scholz, a po- tential SPD candidate for the chan- cellorship. u

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