6 December 2017

Following two weeks of uncertainty, Martin Schulz, leader of the German Social Democrats (SPD), announced on Monday that his party would enter exploratory talks with Angela Merkel’s CDU and her Bavarian sister party CSU. To make sure his U-turn did not just look like a sellout, he was quick to follow up with a long list of demands. The four-page position paper issued by the SPD leadership committee demands a lot from the CDU and CSU – not only on domestic reforms, but also at the EU level. It strikes a decisively pro-European tone, and takes up many of the reforms French President Emmanuel Macron outlined in his Sorbonne speech in September.

More money for a more social Europe

The position paper refers to Macron not just in tone and ideas, but also by name. Among Berlin’s European partners, it is “especially French President Emmanuel Macron” the SPD wants to work with in paving the way towards a more “social Europe”. The paper takes up Macron’s idea of introducing a “system of European minimum wages” (which in the mid-term would likely remain adjusted to different national economies), and seeks to combat tax havens “inside and outside the EU”. To achieve the latter, it identifies “the harmonisation of corporate taxes at the European level” as the only way to “stop the tax avoidance schemes of major international corporations.” Corporate tax rates vary significantly between EU member states, from 10 percent in Bulgaria to 22 percent in Denmark and 35 percent in Malta.

On Eurozone reform, the paper is largely sympathetic to the proposals coming from Paris. While it is quiet on the matter of a Eurozone finance minister, it stresses that Germany “must, together with France, take the initiative on an investment budget for the Eurozone”. The European Stability Mechanism (ESM) is to be transformed into a European Monetary Fund (EMF), and put under parliamentary control (the wording is not clear on whether this refers to the European Parliament or a newly established Eurozone Parliament). This corresponds to plans unveiled by the European Commission today, which would see control over the ESM/EMF move from national finance ministers and parliaments to the supranational level. For all this, the EU will need more money, the SPD concludes, adding that contributions from national funds will not be enough. By claiming that the EU will need “additional own resources” as well, it effectively makes the case for levying taxes at the European level, albeit without being totally explicit.

Not all the demands made in this paper will have the full support of every (senior) SPD party official, nor do they necessarily represent a complete alignment with Macron’s stance. Speaking at a conference in Berlin yesterday, German Foreign Minister and Vice-Chancellor Sigmar Gabriel – himself a Social Democrat – said he wished for the French to “become more German regarding financial matters.” While Germany had to do its part in making the EU more dynamic, “much remains to be discussed” on concrete reforms, with particularly France and Germany facing “many serious discussions” on economic and financial matters, he said.

Just rhetoric, or actual impact?

The SPD had largely refrained from touching upon European issues during the election campaign. Following harsh (self-)criticism over this, a more active position on Europe was introduced as one of the four key issues for the party’s political recovery. This paper is a first translation of this realignment into concrete policy positions. It remains to be seen how far they will ultimately shape German policy. It is far from clear whether another Grand Coalition will be agreed. Even if it is, the CDU and CSU will have to compromise on much, but not everything.  While concessions on a European Monetary Fund and combatting tax havens are easily imaginable, significant movement towards EU-wide minimum wage convergence and a powerful Eurozone budget remains unlikely.

In the end, the European angle may also deliver much-needed support to the SPD leadership. Only a minority of party members is currently in favour of another Grand Coalition, and their veto power enables them to bring down any such deal. Following months of campaigning against the CDU and the Grand Coalition, re-joining them in exactly that same political constellation would risk leaving a sour taste with many SPD supporters. By presenting the return to the government benches in the cloak of a greater good – stability for Germany, social reforms for Europe – the SPD can at least try to increase its scope of action.