Home The Washington Diplomat January 2018 Macron, Merkel Navigate Populism, Russia, Unpredictable U.S. to Unify Europe

Macron, Merkel Navigate Populism, Russia, Unpredictable U.S. to Unify Europe

Macron, Merkel Navigate Populism, Russia, Unpredictable U.S. to Unify Europe

The election of President Donald Trump scrambled what had already been a fraught, fractured political landscape in Europe.

His “America first” doctrine has undermined alliances and his reluctance to forcefully confront Russian aggression has driven a wedge in Europe. Yet Trump’s unpredictability has also brought French President Emmanuel Macron and German Chancellor Angela Merkel closer together, creating a Franco-German alliance that seeks to project a united European front in the face of growing populist forces.

Indeed, The Economist reported that in his first three months in office, Macron met with Merkel nine times, more than twice as often as America’s president and three times as often as heads of state from Britain and Russia.

But Trump is merely a symptom of the populist frustrations sweeping both sides of the Atlantic. This backlash to globalization and elitism has inspired nativist, anti-immigrant parties to establish a foothold in countries from Austria to the Netherlands to Britain, which is in the midst of divorcing itself from the European Union. So while European leaders must recalibrate their foreign policy strategies in response to Trump, many of the underlying problems the continent faces existed before Trump and will likely fester beyond his presidency.

a3.german.franco.group.storyIn response to right-wing populism, euro-skepticism and Russian efforts to sunder NATO, Europe’s leaders are tasked with a challenge they have not faced since the formation of the European Union. They must prove to their publics that the project of integration — including a single currency, free movement across borders and high courts for human rights and trade disputes — has brought unprecedented prosperity and security to the region since World War II.

Both Merkel and Macron have bucked the rising tide of populism by insisting that unity remains key to the continent’s success. As head of Europe’s strongest economy for the last 12 years, Merkel has been the de facto leader of the EU itself, guiding the bloc through the euro and refugee crises while defending the liberal international order.

In contrast to Merkel’s established reputation, Macron is neophyte renegade. A former investment banker who had never before held political office, the 39-year-old centrist candidate upended French politics by forming his own party and winning presidential elections in May. Macron also defied convention by openly embracing the EU and advocating for business-friendly reforms.

But both Merkel and Macron have encountered stiff resistance at home that could hamstring their power on the world stage. After failing to form a coalition government following elections in September, Merkel faces three unpalatable options: try to convince a reluctant opposition party to join her government, rule as a weakened minority government or hold new elections.

Macron’s political position is less precarious, but he too has faced plummeting approval ratings and strong opposition to his proposed labor reforms.

Meanwhile, his drive to reform the EU hinges on cooperation from Germany, but Merkel’s domestic troubles have put his ambitious agenda on hold. Macron warns that failing to improve the EU could lead to a resurgence of far-right populist parties next year.

Beyond the individual struggles of Merkel and Macron, France and Germany historically have held different outlooks on various economic and security issues. While the two countries laid the foundations of Europe’s common market, they diverge on critical questions such as how to help indebted EU member states and whether to accept refugees from war-torn nations — differences that could further hamper the two countries’ ability to keep Europe together.

Eurozone Reform

While the eurozone crisis that rocked the continent in 2009 has faded from the headlines, anemic growth and high debt remain a major concern throughout Europe. The euro crisis led to controversial bailouts of states with weaker economies, such as Greece, by states with stronger economies, namely Germany.

Resentment festered on both sides: Northern EU member states were bitter about rescuing nations on the “periphery” of the eurozone, such as Greece, Spain and Portugal, that they accused of racking up debt and mismanaging their economies. Greece and others countered that these “bailouts” focused largely on austerity measures that exacerbated unemployment and slowed their recoveries, with the money largely going to the northern banks that financed their debt in the first place.

The fact that eurozone members such as Greece use a single currency also made it harder for them to dig out of the crisis. Normally, when countries face asset bubbles, they raise interest rates and devalue their currency to boost exports and stimulate growth. But this isn’t an option for eurozone members because they use a shared currency, which they cannot manipulate to stabilize their individual markets.

Despite criticism of the single currency and its inherent constraints, Macron surprised many by not only backing the 19-nation eurozone, but doubling down on it.

In a lengthy speech on Sept. 26 — two days after the German election — Macron outlined his vision for EU reform and pressed Germany to partner with him on a long-term agenda to deepen integration in the 27-member bloc.

Macron’s proposals include a common eurozone budget, finance minister and parliament, as well as the establishment of a European Monetary Fund. The fund, comparable to the U.S. Federal Reserve, would centralize monetary policy and replace the European Stability Mechanism, the bloc’s current bailout fund. 

Macron also called for common EU policies on defense, taxes and asylum. “To reduce inequalities across the EU, Macron suggested greater harmonisation of tax policies,” including taxing technology companies such as Facebook and Apple and imposing a financial transaction tax, wrote Angelique Chrisafis and Jennifer Rankin in a Sept. 26 article for The Guardian.

On defense, Macron called for a Europe-wide “rapid-reaction force” to work with national armies and a joint European defense budget and policy, ideas already under discussion but in the early stages, The Guardian noted. And on migration, Macron promoted closer coordination through a possible European asylum agency and standard EU identity documents.

The timing of Macron’s speech, just after Germans voted in parliamentary elections, was “conspicuous, if not a little aggressive,” wrote Sophia Besch and Benjamin Haddad in an Oct. 7 article for The Atlantic. “Macron’s real audience seemed to be the parties in the Bundestag with whom [Merkel] now seeks to build a coalition, and find common ground with on divisive issues of European integration.” 

a3.german.franco.macron.merkel.storyBut Macron’s pleas seem to have fallen on deaf ears. The German Free Democrats (FDP) — one of two parties Merkel had been in coalition talks with — rejected the notion of a joint eurozone budget or a single finance minister. Meanwhile, the party most receptive to Macron’s plans, the Social Democrats, got trounced at the polls.

Germany has long prided itself on its fiscally conservative, cautious policies. So while Merkel and other German politicians praised Macron’s calls for greater unity, his ideas for overhauling the eurozone were met with a lukewarm response, even though the proposals were more modest than initially expected.

 German officials — wary of having to bail out profligate EU members — generally oppose the pooling of budgetary resources and shared borrowing across the eurozone. For example, Macron’s vision of a European Monetary Fund would allow European states to spread financial risk. But for Berlin, the focus of such a fund would be on enforcing fiscal discipline, not redistributing wealth between states. And while Merkel does not oppose the concept of a eurozone finance minister or eurozone budget, she differs with Macron in that she prefers a less powerful minister and a smaller budget. Merkel also wants to tackle the issue of creating a single digital market and common asylum policy before addressing eurozone reform.

Given its tradition of fiscal restraint, Germany would not agree to the fully centralized fiscal union envisioned by Macron, according to Charles Lichfield, Europe associate at Eurasia Group.

“What we can hope for is a very limited pot to be used in times of crisis,” Lichfield told The Diplomat.

A more “limited pot” would most likely be a bailout fund to assist individual countries’ banks in the event of another financial crisis. Or it could be something like a European version of the World Bank, which would provide loans to struggling economies within the eurozone.

 Whatever form it takes, the debate over eurozone reform reflects the two opposing views of the countries that would lead the effort.

“The German view centers on a system of rules and the French view centers on discretion,” said Hans Kundnani, a senior transatlantic fellow at the German Marshall Fund.

The German vision for a eurozone finance minister is an “enforcer” of economic rules, while the French vision is for one who “would have much more space to make policy,” Kundnani told The Diplomat.

The French would prefer to build as much flexibility into the system as possible while the Germans would seek strict fiscal conditions on loans to eurozone member states, according to Kundnani.

German Holding Pattern

The future of eurozone reform was further put in doubt by the German elections on Sept. 24.

While Merkel’s conservative Christian Democrats (CDU/CSU) emerged victorious, the bloc and its coalition partner, the Social Democrats (SPD), both saw their vote shares plummet. On election night, the SPD announced it would not rejoin the grand coalition it had formed with Merkel.

Talks between Merkel and the Free Democrats and Greens to form a governing coalition collapsed last month. A last-ditch effort to team up with the SPD is still not out of the question. Its leader, Martin Schulz, has since met with the CDU and may negotiate another coalition government after the SPD “met a backlash for its ‘party first, country second’ position,” as Margaret Wiggins reported Nov. 26 for The Cipher Brief.

If talks don’t work out, Merkel has said she prefers fresh elections over a minority government. According to a Nov. 21 poll, half of German voters want a new election in the wake of failed coalition talks. However, the same poll found that new elections would not significantly alter the September results. “I don’t see any huge change taking place in German policy because of the consensus among the four main parties,” Kundnani told The Diplomat. 

Another election would also inject more political uncertainty into the EU — as it tries to deal with issues such as Brexit and Catalonia’s independence bid — and threaten to derail Macron’s agenda.

“With Ms. Merkel weakened and Germany facing the possibility of a caretaker government before new elections in the spring, European Union reform will be put through another extended delay,” wrote Steven Erlanger in a Nov. 21 article for The New York Times.

Meanwhile, the right-wing Alternative for Germany (AfD) party — formed in 2013 to oppose Merkel’s eurozone rescue — surged on election night, becoming the third-largest party in the Bundestag.

“This means that Germany’s new parliament will be the most fragmented in postwar history,” The Economist reported on Sept. 30.

As a result, “the chances of a Franco-German deal are slim,” said Kundnani.

“Even if Merkel were personally inclined to make concessions to Macron — something that is far from clear — she has been weakened by this election,” Kundnani wrote in an article for the German Marshall Fund in October.

By giving parliamentary seats to AfD and the Free Democrats, another euroskeptic party, the message German voters sent was that they wanted “an even tougher approach” to eurozone reform, according to Kundnani.

“They [gave] Merkel permission to say no to Macron,” he told us.

Whatever German parliamentary coalition Merkel can construct “will agree to piecemeal measures, nothing big,” according to Lichfield.

Ultimately, Lichfield says it is far more likely that the SPD will agree to a renewed coalition government “out of duty” rather than allow, or force, new elections.

Regardless, the political haggling could take months. In the meantime, some have speculated that Merkel’s diminished position opens up an opportunity for Macron to step up and seize the mantle of EU leadership. But most experts agree that given its economic heft, Germany will remain in the driver seat of any major decisions. 

In fact, partly because of the AfD’s rise, Kundnani already sees Macron pulling back his grander vision of European integration.

“Macron’s strategy seems to be, rather than make ambitious demands of Germany … he’s already kind of scaled down his ambitions and is already making much more modest requests of Germany,” Kundnani said.

Ironically, this could mean greater cooperation on the Syrian refugee crisis, a divisive issue in Europe.


The Refugee Crisis

“Because there’s so little prospect of a deal on the eurozone, the focus of a Franco-German deal has shifted to other areas,” such as absorbing the large influx of refugees from the Syrian civil war, Kundnani said.

In 2015, Merkel opened Germany’s doors to about 1 million refugees despite fears that unfettered immigration, particularly from Muslim nations, could lead to terrorism, threaten jobs and drain social services. 

Those fears run deep in France, which has been the victim of high-profile terrorist attacks in Paris and Nice that killed over 200 people.

Macron, however, like Merkel, has bucked populist pressure and urged compassion for those fleeing war and persecution. “Making a place in Europe for refugees who have risked their life is our duty,” he said in his Sept. 26 speech. 

In October, U.N. High Commissioner for Refugees Filippo Grandi praised Macron for working to improve the management of refugees in Europe. But he warned that “only a common approach at the European Union level can make a real difference and make the management of refugees fairer and more effective.” 

That seems unlikely, though, even if France and Germany back the idea. Plans to more evenly distribute refugees to ease the burden on front-line countries such as Greece and Italy have wilted in the face of fierce opposition from countries such as Hungary, Poland and Slovakia.

The refugee crisis that saw record numbers of people fleeing for Europe has subsided since the EU struck a 2016 deal with Turkey under which Ankara agreed to stop asylum seekers from crossing the sea to Greece in return for billions of euros in aid to help Syrian refugees living in Turkey.

Even though it has abated, the refugee crisis has had long-lasting repercussions, giving rise to xenophobic sentiment throughout Europe, even in traditionally welcoming nations such as Germany.

Merkel’s decision to accept 1 million asylum-seekers in 2015 grated on Eastern European countries such as Romania and Hungary, through which thousands of refugees passed on their way to Germany. These countries “felt trampled” by Germany’s unilateral decision, according to Lichfield. 

Plenty of Germans weren’t happy either, and Merkel’s decision cost her at the polls.

“There is no stronger reason people voted for AfD than Merkel’s response to the refugee crisis,” Lichfield said. 

Rise of Right-Wing Parties

Many experts agree that Macron’s domestic position is stronger than Merkel’s, despite a sharp decline in his popularity since winning the presidential election over far-right candidate Marine Le Pen. Macron’s overwhelming victory was a clear rebuke to Le Pen’s National Front party, which railed against immigration and even floated the idea of France leaving the EU, the eurozone and NATO.

“Macron has very favorable conditions and is in a strong political position,” said Lichfield. Many members of the French parliament owe their positions to him, he noted.

Indeed, the centrist political party Macron created just 19 months ago, En Marche!, swept into office with an absolute majority in the National Assembly in France’s legislative elections in June. The party’s fortunes will rise and fall with Macron’s performance — and popularity — while in office. 

But Macron’s position remains tenuous — and the National Front remains a formidable force in French politics, having won 34 percent of the presidential vote.

Like Le Pen’s National Front party, Germany’s AfD has capitalized on the refugee crisis to stoke anti-immigrant, anti-Muslim nativism and pursue its core mission of slowing, and even reversing, European integration.

Despite Le Pen’s loss in France, the surprising success of AfD and the October victory of the anti-immigrant People’s Party in neighboring Austria show that the far right’s influence is waxing, not waning, in Europe. 

Right-wing parties “are slowly becoming normalized in the political system,” Lichfield said. 

This is worrisome to Russia observers, who see the Kremlin’s support of far-right parties as a long-term strategy to sow division in the West.

Countering Russian Influence

That support has come in the form of propaganda, fake news and a direct infusion of funds.

The CIA, NSA and FBI have already concluded that President Vladimir Putin ordered an “influence campaign” to “denigrate” Hillary Clinton and boost Trump. Meanwhile, special prosecutor Robert Mueller continues his investigation into whether high-level officials in Trump’s campaign colluded with Russia.

But Moscow has also set its sights on influencing politics in Europe, pushing pro-Russia parties that take a hard line on immigration and terrorism.

In December 2016, Putin’s United Russia party signed a five-year “cooperation agreement” with Austria’s far-right Freedom Party, according to a Feb. 13 report by Matt Bradley for CNBC. As of this writing, the Freedom Party is in coalition talks with the People’s Party to form a conservative government. 

Earlier this year, Russian state media demonized Macron while praising Le Pen. And in 2014, a bank with ties to the Kremlin made a loan to Le Pen’s National Front worth 9 million euros, according to a BBC report by Gabriel Gatehouse.

Russia’s election meddling appears to have a secondary, but more immediate, motive: getting sanctions against the country lifted. Those sanctions were originally imposed by the U.S. and EU in 2014 after Russia annexed the Ukrainian territory of Crimea.

In a meeting with Putin at the Kremlin in March 2017, Le Pen reiterated her opposition to the sanctions. “I would envisage lifting the sanctions quite quickly” if elected, she said.

But Russian influence extends beyond elections. Russia is a critical economic partner for many European nations. The continent’s dependence on Moscow for its energy needs has also complicated its response to Russian aggression.

The EU relies on Russia for about a third of its oil and gas, according to Reuters. As the BBC reported at the time, Europe’s 2014 sanctions — unlike America’s — included an exemption for Russian gas and nuclear energy because many EU countries relied “heavily” on these exports. 

A new round of U.S. sanctions imposed by Congress this summer in response to Russia’s election meddling has caused fresh concerns in Europe because they target companies involved with Russia’s gas pipelines, such as the controversial Nord Stream 2 project.

This new pipeline, being built under the Baltic Sea to bypass Ukraine, Poland and the Baltic states, will carry another 55 billion cubic meters of natural gas per year to its European customers, according to a July 25 report by Steven Erlanger and Neil MacFarquhar for The New York Times.

a3.german.franco.euros.storyThey write that the U.S. push for additional sanctions “raised concerns that unity could be broken between the United States and the European Union on how to deal with Russia over its annexation of Crimea and its sponsorship of warfare in eastern Ukraine.”

“There’s always business pressure to back off sanctions,” said Jan Lodal, who served as principal deputy undersecretary of defense for policy in the Clinton administration and on the National Security Council in the Nixon and Ford administrations.

Merkel needs to “exercise leadership to keep the sanctions” against Russia, Lodal told The Diplomat.

While Merkel has been key to preserving those sanctions, Germany also has strong trade ties to Russia and is a key partner in Nord Stream 2. Moreover, this time around, Merkel will be working with a U.S. president who is far less willing than his predecessor to take a tough stance on Russia.

Need for U.S. Leadership

“It’s hard to know what Trump’s long-term policy will be [on Russia sanctions]. He’s been ambiguous,” Lodal said.

Whereas past U.S. presidents have given a full-throated defense of NATO, Trump famously called the alliance “obsolete” and repeatedly disparaged its members for not meeting their defense spending commitments.

He has also shown personal disdain for Merkel. In what was widely reported as a snub, Trump appeared to refuse Merkel’s handshake during a photo op before their Oval Office meeting in July. And in a dig at the Trump administration, Merkel told European leaders that “the era in which we could fully rely on others is over to some extent.”

“We are in a period of great uncertainty, so one of the things needed is strong American leadership,” said Lodal, who also served as president of the Atlantic Council from 2005 to 2006.

For his part, Defense Secretary James Mattis traveled to Helsinki in November to meet with the leaders of 12 northern European countries about Russian provocations in the region.

Despite the Trump administration’s mixed signals on U.S. commitments to Europe, a group of German foreign policy experts published an Oct. 11 article in the weekly Die Zeit newspaper and The New York Times declaring that “the United States remains indispensable.”

Titled “In Spite of It All, America,” the article lays out broad policy recommendations for German foreign policy in the era of Trump.

Calling Trump “the first U.S. president since World War II to fundamentally question the ideas and institutions of the liberal international order,” the German authors argued that “an increased responsibility falls to the European Union and its member state Germany to safeguard and strengthen the international order.”

At the same time, they argued that “[t]urning away from the United States would bring insecurity to Germany and ultimately to Europe.”

“Today, no other actor in the world can offer the same advantages to Germany that it gains from its alliance with the United States. No other power takes on such far-reaching security guarantees and offers such comprehensive political resources,” they wrote.

United Western Front

But the article concedes that on some issues, such as refugees and climate change, the U.S. will not be a reliable partner in the foreseeable future.

Meanwhile, Berlin hopes to have in Macron a strong French partner who is serious about defense and economic reform.

Macron plans to raise France’s defense spending to 2 percent of GDP, as required by NATO, by 2025.

He also favors a “multi-speed EU,” in which a smaller “core” — including France and Germany — would knit itself closer together with shared budgetary measures and military burdens.

But this “core” might alienate smaller countries who would see their influence wane under Macron’s centralized EU. And, as many experts have pointed out, Macron first needs to convince Germany that France can credibly keep financial commitments and reassure businesses that it is modernizing its economy.

After all, it was Germany that imposed austerity during the euro crisis, demanding that struggling eurozone states meet strict fiscal rules and enact structural reforms. In contrast, Macron has supported aiding debt-ridden EU members such as Greece and criticized Berlin’s emphasis on austerity. At the same time, the French president has pledged to reduce deficits, make the private sector more competitive and cut the country’s stubborn unemployment rate.

“He [Macron] will surprise them, because the Germans don’t believe it will happen,” one of Macron’s advisers told The Economist in a Sept. 30 report. “They have been disappointed by France too many times before.”

Macron has taken steps to open the French economy and relax state controls over business. In September, he approved the merger of Germany-based Siemens with the French railcar company Alstom. The merger aligns with German leaders’ longtime goal of capitalizing on Europe’s single market by creating companies large enough to compete with U.S. and Asian behemoths.

Also in September, Macron signed into law a sweeping labor reform package aimed at revitalizing the economy.

“Mr. Macron’s changes make it easier to hire and fire workers and allow some workplace issues to be negotiated directly at the company level, rather than through industrywide agreements, in hopes of stimulating both growth and job creation,” Alissa J. Rubin reported for The New York Times on Aug. 31.

“The government focused especially on smaller businesses with fewer than 50 employees — the majority of French businesses — which have complained bitterly about excessive red tape and regulations,” Rubin wrote.

Macron also wants the EU to play a central role in simulating growth and jobs in the eurozone, according to Lichfield, to fend off populist movements and prove that European integration benefits everyone.

“The Germans know Macron needs to be seen to succeed,” said Lichfield.

But they don’t necessarily know if he will. As Besch and Haddad noted in their Atlantic article, Merkel, who has been chancellor for 12 years, “has listened to three successive French presidents lecture about the future of the EU.”

“In the end, none delivered,” they wrote.

Macron promises this time will be different.

About the Author

Ryan R. Migeed (@RyanMigeed) is a freelance writer based in Boston. Anna Gawel (@diplomatnews) is managing editor of The Washington Diplomat.