Germany fears more steps toward a federal Europe could inflame anti-EU populism

By Marcus Walker

BERLIN— Emmanuel Macron’s big idea for Europe is to deepen the euro currency union, whose incomplete design he likens to “half-pregnancy.”


His success—or failure—in France and Europe may well go hand in hand. But to get what he wants he will first have to convince a skeptical Germany.

The victor of Sunday’s French presidential election, according to preliminary projections is a staunch defender of the euro and European integration in general. At campaign rallies, he waved the European Union flag. He also argues, however, that the status quo works better for Germany than for others—a widespread view in France and Europe’s indebted South.

The 39-year-old’s call for deeper integration, including the creation of a common eurozone budget for investment and for supporting crisis-hit countries, flies against firm German convictions. The prevailing view in Berlin is that, given the current anti-establishment mood in much of the continent, more steps toward a federal Europe would inflame anti-EU populism, rather than countering it.

Germany’s political establishment has looked upon French ideas for collective, state-directed investment programs doubtfully for decades.

Yet Berlin is also keen for Mr. Macron to succeed at home where outgoing President François Hollande failed: in shaking up a sluggish French economy. Economists say France needs to overhaul its heavily regulated labor market, where restrictions have contributed to stubbornly high unemployment of around 10%.

The price if Mr. Macron were to fail, many policy makers across the EU fear, could well be a victory in the 2022 presidential elections for Sunday’s defeated candidate, the far-right, anti-EU nationalist Marine Le Pen.

“For Macron to succeed, he needs a partner in Germany,” said former European Central Bank director Jörg Asmussen. “If Macron can show that he is able to shape change in Europe, that would also help him domestically,” he said. But he cautioned: “It doesn’t solve the problems of the French labor market. But success in one area helps success in another.”

Last week, Mr. Asmussen joined with numerous, mainly left-of-center German politicians, economists and other public figures in a public call for Berlin to engage with Mr. Macron and not rebuff his ideas. The strength of anti-EU voter sentiment in France partly reflects the perception that Germany dominates Europe, the joint statement said.

German Foreign Minister Sigmar Gabriel, who recently stepped down as leader of the center-left Social Democrats, has also welcomed Mr. Macron’s initiative. But his party, the junior partner in Chancellor Angela Merkel’s governing coalition in Berlin, is deeply ambivalent about putting more of German taxpayers’ money at Europe’s disposal. Ms. Merkel’s conservative Christian Democrats are even less eager.

Neither of Germany’s two major parties is campaigning for deeper European integration ahead of the country’s elections this September. Political strategists for both parties believe there are no votes in it. Even Social Democrat candidate for chancellor Martin Schulz has been circumspect, despite his pro-federalist stance in his previous post as president of the European Parliament.

Aware of the prevailing skepticism, Mr. Macron made his pitch to Germany in a speech at Berlin’s Humboldt University in January. His language was diplomatic, but the subtext was clear: Germany’s huge trade surpluses and fixation on fiscal austerity have hurt growth and support for the EU elsewhere in the continent.

Offering a “New Deal,” Mr. Macron suggested France needed to win Germany’s trust through overhauls to meet eurozone fiscal rules—and that Germany should accept that it can’t sustain economic growth if other nations in the euro are struggling. “The euro is incomplete and cannot last without major reforms,” he said.

Concretely, he proposed a common eurozone budget, funded from both tax revenues and common borrowing, which would finance investment programs, and also support countries hit by economic crises.

Economists close to Mr. Macron say he knows that in order to gain more credibility with Germany than Mr. Hollande had he must show he can push through difficult economic overhauls in France.

Germany’s powerful finance minister, Wolfgang Schäuble, has said repeatedly over the past year that the time isn’t right for deeper integration of the EU or eurozone, because public support for a federal Europe is lacking. He has called instead for more ad-hoc cooperation between governments that are willing to act together in areas such as defense. Mr. Schäuble is seen throughout the eurozone as the toughest foe of proposals for common fiscal policies that could create new liabilities for Germany.

Germany’s September election might lead to Mr. Schäuble leaving the finance ministry, if the Social Democrats demand the ministry in return for serving again under Ms. Merkel. However, even the Social Democrats have rarely strayed far from German orthodoxy on finance, fearing that the Christian Democrats would attack them for handing German taxpayers’ money to Southern Europe.

“Macron is not blind to German views,” says Nicolas Veron, a French economist and fellow at Brussels think tank Bruegel. “His aim is not fiscal union, but to start a meaningful conversation about how to strengthen the eurozone. His idea for a eurozone budget is an opening gambit.”

This site uses Akismet to reduce spam. Learn how your comment data is processed.