The expectations of the EU partners of the new German federal government are huge after rather sobering years of the grand coalition and its European policy. Much has been left behind in the European Union in recent years. In addition to the withdrawal of the United Kingdom from the EU, no progress has been made in areas such as the ability to act autonomously in foreign and security policy (e.g. Afghanistan withdrawal).
On the other hand, the pandemic led to an impressive European solidarity despite initial unilateralism (e.g. border closures). An agreement was reached on a historic 800 billion euro Recovery Fund, financed by a first-time joint borrowing. But permanent construction sites such as a continuously rising national debt, especially in southern Europe, or European disagreement in dealing with the provocations and cyber attacks of Russia or its satellite Belarus remain. The incumbent populist governments in Warsaw and Budapest are deliberately ignoring European jurisprudence and common European values and create instability in their own European home.
Against this background, some EU politicians consider it a major failure that Angela Merkel has never given a real answer to Emmanuel Macron’s EU reform proposals. Macron’s proposals in 2017 had opened up a window of opportunity for the further development of the EU. Paris stretched its hand to Berlin in order to reform the EU, but Berlin did not take it.
The now published programme of the new federal government of the SPD, Bündnis90/ Die Grünen and FDP therefore is remarkable in several respects, as the preamble states: “Germany and Europe must re-establish their economic strength in the face of intensified global competition. The current international system rivalry obliges us to to defend our values resolutely with democratic partners.” This can confidently be understood as a positioning against unfair competition from American or Chinese companies as well as against inner and external enemies of democracy. On the other hand, of course, a preamble does not make politics.
The coalition agreement itself contains terms coined in Paris such as ‘strategic sovereignty’, ‘ability to act in a global context’, and puts emphasis on the German-French partnership and the announcement of an intensified strategic German-French dialogue on the basis of the Treaty of Aachen. As expected, Olaf Scholz has already announced that his first trip abroad as Federal Chancellor will lead directly to Paris.
Even a further term of office for the Commission President Ursula von der Leyen (CDU), initially proposed by Emmanuel Macron, does not seem to be ruled out beyond 2024, as Bündnis90/Die Grünen would only use its right to nominate the next German EU Commissioner “if the Commission President does not already come from Germany”.
It’s noteworthy that the coalition supports the further development of Europe into a federal state, that it calls for a European foreign minister and refers almost two dozen times to the European Commission or its proposals, in particular the European Green Deal and the detailed climate and energy policy package ‘Fit for 55’.
A central concern of the new Federal Government becomes clear in this passage: “Achieving the climate protection goals of Paris is our top priority. We are creating a set of rules that clears the way for innovations and measures to put Germany on the 1.5-degree path. We are bringing a new pace to the energy transition by removing obstacles to the expansion of renewable energies. Step by step, we are ending the fossil age, also by ideally bringing forward the coal phase-out to 2030 and leaving the technology of the combustion engine behind us.”
So much for the postulated ambitions. At the same time, it’s already foreseeable that in particular three political dilemmas will arise for the new government-coalition as far as the co-operation with its EU partners is concerned.
1. Renewables vs. (Russian) gas and (French) nuclear power
The coalition is proposing a “massive” expansion of clean energy by raising the current target of renewable energy supposed to account for about 65 percent of electricity generation by 2030 further up to 80 percent. This target is highly ambitious because electricity consumption will increase by more than 20% to a total of 685 terawatt hours in 2030 (Energy Economics Institute of the University of Cologne).
The early phase-out of coal by 2030 and the phasing out of nuclear energy in 2023 will tear a huge electricity production gap that is unlikely to be closed due to the well-known difficulties with the expansion of renewable energy in Germany.
This raises the question of how Germany can be supplied with electricity during the transition.
In order to meet the demand for electricity by 2030, Russian gas and French nuclear power in particular will be necessary. Moreover until enough green hydrogen is available, blue hydrogen must be produced from Russian gas, which will continue to provide CO2 emissions.
On the one hand, this raises concerns about the security of Germany’s energy supply. Russia is already Germany’s most important gas supplier, and if the North-Stream-2 pipeline is approved next year – despite the negative stance of Bündnis90/ Die Grünen – this dependence will continue to increase. On the other hand, the SPD and the Greens, both in Germany and on EU level, are vehemently opposed to further investments in nuclear power and are thus in conflict with at least ten other EU states, namely France followed by Bulgaria, Finland, Croatia, Poland, Romania, Slovakia, Slovenia, the Czech Republic and Hungary.
2. Investments in a climate neutral Europe while preventing a fiscal and transfer union
The achievement of the emission reduction target of -65% by 2030 in Germany means an annual public investment requirement of about 45 billion euros per year (source IW Köln). At European level, this corresponds to an additional investment requirement of EUR 360 billion per year to achieve -55% emissions by 2030 (source Bruegel and EU Commission).
Due to the pandemic, the EU activated the general escape clause in 2020, which suspends the obligations of the EU Stability and Growth Pact (originally a German condition for the acceptance of the euro) until the end of 2022.
France has already declared the Stability and Growth Pact as obsolete, not least because of the immense public debt in some EU countries (Greece 180%, Italy 149%, France 114%, Spain 110% of the GDP). Paris wants a radical reform of fiscal rules among others supported by Italy and Spain.
In their coalition agreement, the new German government parties signal openness for a reform of the EU Stability and Growth Pact in order to “ensure growth, maintain debt sustainability and allow for sustainable and climate-friendly investments”. So far, however, it’s not clear how – without further indebtment – the EU Recovery Fund is supposed to be repaid, nor where the money for additional investments necessary for the economic transformation in Germany and EU should come from.
3. Preserving the rule of law and European values while preventing Polexit & Hungarexit
Mostly the EU states in Eastern Europe have a particularly long way to go in terms of economic transformation, not least because of their strong dependence on fossil fuels, especially coal. Germany’s plans of an accelerated coal phase-out will increase pressure on Poland, Bulgaria and the Czech Republic both economically and politically (by 2030, these three countries together will account for 95 percent of the remaining coal in the EU’s electricity market).
On top of that, the new German government coalition members intend to put more pressure on Poland and Hungary as they claim that “the existing rule of law instruments should be used and enforced more consistently and promptly”. Against the background of ongoing controversies between Warsaw and Budapest on the one hand and Brussels on the other, that means to cutt off EU funds for Poland and Hungary. Meanwhile Paris is already calling to further toughen the course towards Poland and Hungary.
This ongoing prospect, coupled with the new German government’s desire to address necessary treaty changes to develop the EU ultimately into a “European federal state”, is likely to further alienate Poland and Hungary from the EU. The idea of a Polexit or Hungarexit or even both, previously unimaginable, has now become conceivable.
The dilemmas presented above will face a reality check right after the new Federal Government takes office.
Currently the proponents of nuclear power (ten EU countries led by France) and the supporters of natural gas (seven Central and Eastern European countries lead by Poland) fight to secure sustainability labels for their favorite energy source. That means that the credibility of the EU Taxonomy for sustainable investment, undoubtedly the most comprehensive project of its kind and a cornerstone of the European Green Deal financing, is at stake.
In January 2022, France will take over the EU Presidency, at a time when critical regulatory decisions are to be made. Many of these decisions concern the competitiveness of the German as well as European economy for years to come. The Digital Markets Act / Digital Services Act will leave its mark on the digital sector.
Moreover the ‘Fit for 55’-package will transform the energy industry, design the future charging infrastructure, promote electromobility, defines alternative fuels and what qualifies as renewable energy.
Against this background, the new German government coalition will need a lot of political pragmatism and the ability to compromise in order to inspire the other EU partners for its own climate and energy ambitions.