25 September

There were high expectations about Germany in the run-up to this election. Political observers especially in Paris, Brussels and London were hoping for a decisive German government, ready to take on a lead on Eurozone reform, European integration or Brexit negotiations respectively. As things stand now, they will all need to continue waiting. Germany’s federal elections did not give them what they were hoping for.

Despite Merkel’s nominal victory, she enters her fourth term considerably weakened, almost certainly depending on both the Free Democrats (FDP) and the Green Party for a majority in parliament. Patching together this coalition will take time, probably until Christmas. During this period, Merkel will be unable and unwilling to commit to big acts on the international stage, forced instead to first consolidate her new government at home. Once a new governing coalition has settled in however, the German government will need to face several political challenges at home as well as in Europe.

Macron will plead; Merkel won’t be able to respond.

France’s Emmanuel Macron will take the stage at the Sorbonne University in Paris tomorrow, outlining in detail his ambitious reform proposals for the Eurozone. He will repeat his demands for the creation of a Eurozone budget worth several percent of the union’s GDP, the creation of a powerful Eurozone finance minister, and the transformation of the current European Stability Mechanism (ESM) into a European Monetary Fund (EMF). With plans ultimately depending on German approval, Macron’s public intervention was strategically planned to take place directly after Germany’s federal election, in which expected Merkel to be comfortably returned.

The inclusion of the FDP in German government was expected to be critical in influencing Berlin’s position on the issue. The FDP has openly criticised Macron’s reform ideas in the past. Party leader Christian Lindner called Macron’s proposal for a Eurozone budget “a sort of permanent fiscal equalization scheme and a transfer union that would endanger the future of Europe”. On election night, he stressed once more that automatic transfers in Europe constitute a red line for his party.

Speaking on the issue today, Merkel said she was “not going to rule out anything or set red lines”, but “support what makes sense”. While she remains open to Macron’s ideas, she stressed that “more Europe […] has to lead to more competitiveness”, a position similar to the one represented by the FDP. She concluded that “today is not the day to say ‘this works’ and ‘that doesn’t work’”, announcing that her party would “need to talk to the FDP” about this.

Macron is thus unlikely to receive a proper German response to his speech on Tuesday anytime soon. Instead, his plans, and indeed the future of the Eurozone, will depend on the outcome of German coalition negotiations. The final outcome is likely to be a mixed bag: the FDP as well as parts of CDU/CSU will reject the most ambitious parts of Macron’s proposal, but might be willing to agree to some sort of Eurozone finance minister with a small budget. The European pressure on Germany may be too high on this issue to block off Macron completely, and Greens as well as many CDU members agree on the need to lead Eurozone reforms alongside Macron.

Don’t expect anything on Brexit.

There was the (somewhat mistaken) hope among some Brexiters that, following a victory in federal elections, Angela Merkel would suddenly come out in support of the UK in Brexit negotiations, helping London cut a deal. While this scenario never stood much of a chance in the first place, it does so even less now. Germans are not particularly impressed with or concerned about Brexit, and neither are German parties. With the drastic changes this election brought about for Germany’s political landscape, and the extremely complicated coalition negotiations still ahead, German parties will prioritise domestic issues.

Germany’s Free Democrats were expected to shift Berlin’s position on Brexit slightly in the UK’s favour, as we explained on a previous blog. While they are indeed likely to be part of Germany’s next government, they would be balanced by the free trade-sceptical Green Party. Even if the FDP is in fact well-disposed towards British interests, it is unlikely they will waste too much bargaining capital on Brexit-related issues during coalition talks. They will look inward instead, trying to protect the German car industry from harsh legislation by the Green Party.

Quo Vadis, Brussels?

In Brussels many had waited for German elections to deliver clarity on where Berlin wants to take Europe. Much has been made of the fact that all parties entering the German parliament are pro-European, even the far-right AfD and far-left Die Linke. Still, there are decisive differences between all parties on how they want the EU develop.

One of the few points on which a “Jamaica Coalition” is likely to agree without much trouble is the need for further integration of Europe’s defence capabilities (although the Greens will make sure this happens through reallocation of existing budgets rather than increased spending). Moreover, security and defence are issues on which German voters want to see more European integration. Expect Germany to take a leading position on these matters.

On the issue of a ‘Europe of multiple speeds’ German parties are divided. Where the SPD and FDP are clearly in favour of it, the CDU and CSU remain reluctant yet not outright opposed. The Green Party approves of flexible integration only “in exceptional cases” where “it can be necessary that a group of member states goes forward […] on important issues”. While it is thus unlikely that a new German government will openly embrace a ‘flexible union’, it will accept its necessity on certain key issues.

With questions over immigration and asylum dominating Germany’s election campaign, a new German government will try hard to find solutions to these issues – something that inevitably involves the European Union. If it should come to a “Jamaica Coalition”, the most likely outcome at this point, Berlin’s position on migration reform will be a difficult compromise between extremely liberal (Green Party), moderate (FDP, CDU) and strictly conservative (CSU) positions. It is likely to lead to a strengthening of the EU’s external borders. There will be no repetition of the 2015 attempt to force refugee quotas on other member states; a policy that led to a serious fallout between the EU’s eastern and western member states.