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The implications of the German coalition agreement for Europe


German coalition agreement – Commentators have been poring over the 185-page coalition agreement between the German CDU/CSU and the SPD. Germany is the largest economy in the EU and has played a decisive role in recent years in crafting the policies that have sought, to date unsuccessfully, to resolve the economic and financial crisis. What then can Europe hope for from Germany’s next government, based on the text of the coalition agreement?

(I skip over the “detail” that the Grand Coalition has to be approved in a vote by all SPD members. There will be considerable opposition, but I cannot see the grassroots rebelling against the party leadership.)

Judging only by the sections that explicitly deal with European issues, the short answer is nothing good. Fortunately a number of measures motivated purely by domestic concerns will have favourable knock-on effects on the rest of Europe. Overall, then, the impact ought to be a small positive.

Weak Europe!

The section on Europe bears the title “Strong Europe” and opens with a section on “Germany’s responsibility for Europe” (all translations are mine). Both headings are highly misleading. The policies envisaged will help ensure that Europe will remain enfeebled and Germany’s “responsibility” for Europe limited. Behind the pious language the nine pages can be summarised as saying that the previous and future Chancellor Merkel and her Finance Minister Schäuble will continue to hold the reigns of German policy on Europe firmly in their hands.

The interpretation of the causes of the crisis focuses on fiscal laxity in some member states and a lack of competitiveness, the solutions on “structural reforms for more competitiveness and strict sustainable fiscal consolidation”. This we know is wrong. I will save myself the trouble of including hundreds of hyperlinks. Symptomatic of the approach in this part of the agreement is that a few costless bones are thrown to the social democrats: the consolidation must be accompanied by “socially balanced investments in growth and employment”, without anywhere setting out clear commitments to or mechanisms for such additional investment. Accordingly there is a section on the social dimension of integration, with a good deal of social democratic language, for example on balancing the market freedoms with fundamental social rights, but little by way of hard content.

There is vague talk of a need for more economic and fiscal policy coordination without any concrete proposals, but also to continued budgetary consolidation (aka austerity) and a commitment to the strengthened stability and growth pact. Germany is prepared to offer loans and “technical support” to help reform-minded politicians regain competitiveness. That is clearly what the crisis countries need: parachute in German experts from the early 2000s labour market reforms whose negative consequences are now being (partially) reversed by the Grand Coalition (see below). Worse, there is a strict denial of the need for any form of debt-pooling, an insistence that European financial support is an ultima ratio, that requires strict conditionality and parliamentary approval (that is, approval by the Bundestag, of course).

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