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Cracks in Brussels

Signed. Sealed. Delivered. Three months after the last German elections threw up an uncertain government formation, Angela Merkel, who failed to win an absolute majority, finally announced a “grand coalition” with the dithering Social Democrats (SPD), who validated their decision to join with an unusual reference to the rank and file of the party who gave a whopping 76 per cent vote to join Merkel’s CDU in governing Germany for the next four years.

How does the coalition government look? SPD won a weighty portfolio in Sigmar Gabriel who was anointed Germany’s “super-energy minister” in combining energy and economics under his hat. The ever important finance portfolio continues to remain in the hands of the old CDU minister Wolfgang Schaueble, indicating the firm grip on the crucial domestic and eurozone policy issues.

A notable appointment has been in the defence ministry where Ursula von der Leyen has taken charge of the armed forces and the various controversies, especially the withdrawal of Germany’s combat mission in Afghanistan in 2014 that still follow them. Naming a female colleague from Merkel’s own party has been seen as a move to shine the light of a potential successor at the next election.

Good governance is now the watchword. Germany’s domestic issues are as varied as they are politically coloured. With financial decisions relating to the now partner (SPD)-led demands for a minimum wage policy and pension reforms high on the agenda, the fate of the euro and the eurozone and the implications for Germany as the leading economy in Europe are precariously balanced. The government may have to continue to exercise tight-rope walking as it did in the previous term.

While many more answers are sought for in the international arena, such as on the need for a uniform and strict EU-wide policy on immigration, the government’s immediate focus is on the financial and fiscal policies of EU governments that have been singed by the necessity of too frequent bailouts of mismanaged economies, and the fact of Germany almost always having to come to the rescue by its timely and often innovative methods.

But a re-elected and recharged German chancellor has shown that she meant business when she appeared in Brussels at an EU summit last week to launch a definitive programme of structural reforms in the eurozone that seeks primarily to enforce binding contracts on European governments with European institutions in exchange for additional financial assistance as the need may be.

Chancellor Merkel was unable to remove serious apprehensions of EU ministers that such a set of structural reforms would result in the creation of strong anti-establishment, anti-EU and anti-immigrant interests that may even lead to the creation of new parties and seriously hamper their prospects at the forthcoming European elections in May ’14.

What militates against a rigid move of contracts with EU governments is the basic fact that financial and fiscal policies are the prerogative of the member states rather than EU institutions. Interestingly, the countries that have enacted a slew of reforms also happen to be those that were desperate for bailouts, witness the cases of Greece, Ireland and Spain. Furthermore, countries such as France and Italy that have not so far come under official EU programmes may now feel vulnerable in this regard.

The creation of a European banking regulator overseen by the European Commission has been debated by the EU for quite some time and is one of Germany’s problem areas as it may be difficult for Germany to abide by its directives if German banks and taxpayers are seen to be disadvantaged by them. The idea of a European banking union, as distinct from a regulator, is moving, albeit slowly, with Germany already taking a step to set it up, possibly by May 2014.

But all eyes are now on the German government’s commitment to the nuclear energy issue where it is planned to be phased out completely by 2020. Germany’s energy needs will be met by renewable energies such as solar, wind and biomass. While it is perfectly in order, the fact that the government would be providing subsidies to the private sector in the development of these technologies will clash with the strict rules of the European Commission.

All things considered, how Germany will manage its energy policy will be what the world will be keenly watching due to the breadth and boldness of its programme. Can it pull it off?! Why not?

M N Hebbar is a veteran journalist and commentator on European affairs