6 January 2014

Angela Merkel is visiting London tomorrow to meet David Cameron. Ahead of her visit last year, Open Europe published an outline for how a potential Anglo-German ‘grand-bargain’ on EU reform could look. Here we assess what progress has been made in the key policy areas since.

Treaty change

German willingness for treaty change has been tempered. Although Merkel and Schäuble still want to lock in budgetary discipline in the Eurozone, even German politicians are now beginning to talk down the prospects.  The rise of populist and anti-austerity parties may also mean the prospects are less promising, given their opposition to giving up more budget sovereignty. This could change if Germany needs political cover to put more cash on the table. In any case, this is a problem for Cameron who remains committed to securing Treaty change by 2017.

Returning powers to member states

The strong performance by anti-EU and anti-establishment parties in the European elections led member states to give the Juncker Commission a tighter mandate with former Dutch Foreign Minister Frans Timmermans appointed to ensure the EU would not interfere in areas better handled nationally or locally – as Open Europe had called for.

Single market safeguards

Shortly after Merkel’s visit, George Osborne and Wolfgang Schäuble penned a joint op-ed in The Financial Times where they acknowledged that: “future EU reform and treaty change must… guarantee fairness for those EU countries inside the single market but outside the single currency.”

As we have argued before, many German politicians think the UK has a fair point here, but the exact organisation of the safeguards will be tricky.

Reforming EU rules on access to benefits

Cameron’s immigration speech – in which he proposed a four-year qualification period for in-work benefits for EU migrants – was relatively well received in Berlin with the government saying that it was “willing to co-operate closely” with London. Berlin was particularity pleased with the absence of a cap on EU migration, something it appeared at one point Cameron might propose. There were also signs of agreement on restricting child benefits sent abroad, as well as on further restricting access to unemployment benefits, particularly in the wake of the ECJ’s ruling in the Dano case.

Limiting EU regulations

Pressure for a leaner, more efficient EU from the UK, Germany and others has resulted in a much more reform-orientated European Commission with Frans Timmermans appointed as the EU’s red-tape cutter in chief with a brief to build on the previous Commission’s tentative efforts in this area. Timmermans has made a good start although there is still a long way to go.

Increased powers for national parliaments

This is an area where London and Berlin are still at odds, with Cameron and Merkel clashing last year over who should have the final say over the appointment of Jean-Claude Juncker – national governments, accountable to national parliaments, or the European Parliament. While Merkel was not that keen on Juncker herself, it illustrated that the concept of the European Parliament as the ultimate democratic check on key EU decisions still holds force in German elite circles. Still, there is plenty of support in Germany for stronger Bundestag involvement in EU affairs.

Reforming EU regional development subsidies

Despite the huge row over the EU budget surcharges, there has been little debate regarding the substance of the EU budget. Limiting regional spending to poorer member states is still something the UK and Germany can agree on but this issue is unlikely to come up before the mid-term review of the EU’s long-term budget in 2016.

Further services liberalisation

Germany still lags behind on services liberalisation for which it has been picked up on by the OECD, IMF and European Commission. Encouragingly however, in their joint FT piece, Schäuble and Osborne agreed that “we must complete the EU’s single market, especially in services”. This is something we have been advocating for some time as it could boost the EU’s economy by €294bn.

 Ambitious external trade deals

Over the past year TTIP – the proposed EU-US free trade agreement – has come up against huge opposition from an assortment of politicians, trade unions and environmental lobby groups, above all in Germany, with the most common complaint being the inclusion of controversial protection clauses for investors (ISDS). In September, Vice-Chancellor Sigmar Gabriel suggested he would re-negotiate the EU-Canada agreement (seen as a template for TTIP) to remove ISDS, although he has since backed down.