The rotating six-month presidencies of the EU no longer shape its policies as they once did. But Germany, the holder of the office from July 1, is different by dint of its economic and political weight. For understandable historical reasons, it has taken care to use its power lightly, even as it has drawn all the commercial advantages it can from the single market. On top of this reluctant hegemony, Germany in recent years has been frustratingly tentative. The demands of consensus-based governance are partly to blame. Yet the fact is that in the twilight of Angela Merkel’s political career it had in many areas become a force for inaction.
Coronavirus has changed that, showing the country’s strengths and reinvigorating Ms Merkel’s chancellorship. After suffering less in terms of deaths and economic damage relative to its neighbours, Germany has recognised its responsibility to show solidarity.
Berlin’s presidency is likely to be defined by the success, or failure, of two big negotiations: an agreement with Brexit Britain; and a proposed €750bn recovery fund and new seven-year budget. On the former, Berlin is unlikely to play the role some Brexiters still dream of and press its partners to accept a deal favourable to the UK. But on the latter, Berlin’s part in sealing a prompt agreement will be crucial.
It is no exaggeration to say the fund is crucial to Europe’s stability. By lending fiscal firepower to the recovery, it takes pressure off the European Central Bank’s overburdened monetary policy. It will help to cushion the economic pain in member states that have less fiscal space to do so on their own. It will help prevent long-term economic divergence between the EU’s prosperous north and a south that was badly hit by the pandemic and the disruption to important tourist industries which could eventually make the eurozone unviable. It will rekindle a spirit of solidarity, which is the EU’s lifeblood.
By teaming up with France’s Emmanuel Macron to back the groundbreaking idea of a fund that takes EU-issued debt and hands it out as grants, Ms Merkel demonstrated her understanding of what is at stake. Her job now is to win over sceptical governments that risk blocking an agreement, despite the dangers for Europe.
There are issues still to be resolved, including how the debt raised would be paid back and on what criteria EU members would receive grants. A particular bone of contention is the conditions attached. Northern countries want to ensure the money is used wisely, either for pressing health needs or to boost longer-term productivity, job creation and low carbon technologies. The would-be recipients rightly say the money should be made available and spent quickly. They also balk at the memory of the tutelage imposed by the “troika” of European and IMF officials during the eurozone crisis.
It should be possible to find a compromise, where governments are obliged to reform and invest to boost longer-term sustainable growth without intrusive oversight. The big difference now is that this is about spending money, not saving it through the austerity which did so much to undermine the EU’s legitimacy in crisis countries.
It would be more than welcome if Ms Merkel extended her commitment to other areas where German foot-dragging has hindered progress, such as banking union. Impetus from Berlin would help lend the EU a coherent strategy towards an increasingly belligerent China. A transatlantic trade war will also consume Germany’s attention. But it is the delivery of the EU recovery fund that will be the measure of success for Germany’s presidency — as well as a fitting legacy for its chancellor.