It's the EU Stupid

German Campaign Turning into a Debate Over Europe

In six months, Germany will go to the polls in a showdown between Chancellor Angela Merkel and her Social Democratic challenger Martin Schulz. One issue is set to dominate the campaign: What to do about the European Union. By SPIEGEL Staff

 Photo Gallery: EU Issues Dominate German Election

Around the same time that the British representative in Brussels handed over the letter officially notifying the European Council of the UK's intention to leave the EU, in late March, ambassadors of the 27 remaining member states were meeting a couple of floors below. They planned to discuss the post-Brexit future of the European Union over lunch. To focus the conversation, the European Commission had posed a concrete question for the ambassadors to debate: Does the bloc need to become more socially minded?

All of the ambassadors present had their say, with a wide variety of proposals ranging from an EU tax to a standard minimum wage to joint European unemployment insurance. Only the German representative had nothing to say. The German government's position, he said, hadn't yet been determined, he told his puzzled counterparts.

The delay wasn't the experienced ambassador's fault. The blame lay with a burgeoning dispute in far-off Berlin, between the Chancellery of Angela Merkel, of the center-right Christian Democrats (CDU), and the Foreign Ministry of Sigmar Gabriel, of the center-left Social Democrats (SPD). An internal government paper described a "fundamental disagreement": While Gabriel's officials were insisting on "introducing proposals from Germany," the Chancellery was opposed to going beyond statements that had already been made.

The two sides in the dispute were unable to reach an agreement, resulting in silence.

With six months to go before parliamentary elections in Germany, the SPD is seeking to pressure Merkel on an issue on which she had long seemed invulnerable: the European Union.

Until recently, the chancellor had looked like the most powerful politician on the continent, a leader who had managed to keep the bloc together through all manner of crises by moving carefully and deliberately.

But then her refugee policies turned half of Europe against her. And now she finds herself facing Martin Schulz in the race for the Chancellery, a man who is deeply committed to the EU and who has the Brussels system to thank for his political ascent. Moreover, like Helmut Kohl, Schulz is more than willing to open Germany's checkbook if it means keeping the EU together.

Since Schulz's nomination by the SPD, Merkel's coalition - which inconveniently pairs her conservatives with the SPD - has been consumed by discord. Schulz and Gabriel are demanding that the austerity requirements imposed on debt-consumed southern European member states be relaxed. They want more money made available for the EU budget and are demanding that the EU's mandate be expanded with the inclusion of a "social dimension." Awkwardly for Merkel, the same demand has been made by European Commission President Jean-Claude Juncker, who is a center-right ally to the CDU, and by the heads of government of many Mediterranean member states, which dream of a joint insurance system and minimum labor market standards.

Every euro for the EU "comes back to us several fold," Gabriel wrote recently in a contribution for the daily Frankfurter Allgemeine Zeitung. And Schulz intends to make clear that Social Democrats won't simply "capitulate to the pressure to lower social and ecological standards."

At issue are the consequences of Brexit, the future of the EU and, not least, the question as to who better taps into the mood of the electorate. Gabriel and Schulz believe that Germans, in the age of nationalism and populism, are prepared to sacrifice more financially for Europe. The chancellor, by contrast, is opposed to transferring more social competencies and the money that would require to Brussels. Instead, her circle is repeating vocabulary such as "reforms" and "competitiveness" while pointing to the most recent surveys. Those polls show that a clear majority of Germans are opposed, for example, to providing Athens with yet more aid.

The Greek Question

It's no wonder that the flames of the conflict are being fanned by the never-ending discussion over Greece. For months, international backers have been negotiating with the deeply indebted country over the same old scenario: Athens is lagging on its reforms but will soon need fresh billions from the European bailout funds.

Finance Minister Wolfgang Schäuble and his counterparts in other EU member states are insisting on further austerity measures. They would like to see Athens reduce the tax-exempt income amount and make further pension cuts to produce higher budget surpluses in the coming years.

But Greek Prime Minister Alexis Tsipras is not prepared to do so, with elections approaching in 2019, and has found surprising support in Berlin. At one point, Foreign Minister Gabriel supported the idea of Greece leaving the eurozone, but recently, in a discussion prior to a recent cabinet meeting and again by telephone during the following weekend, he urged Merkel to make concessions to Tsipras. "I don't think it is particularly intelligent for us to have forced Greece to cut pensions by 40 percent with three adjustments within just a few years," Gabriel says. Plus, he adds, the country is now producing budgetary surpluses.

Germany's SPD has identified Finance Minister Schäuble as their preferred target. "Schäuble wants to bring Greece to its knees," Schulz has grumbled. Even the International Monetary Fund, whose advice has long been important for the CDU, wants to give Athens more flexibility, Schulz says. "Now Schäuble is fighting against the IMF," Schulz continues. "The finance minister only accepts expert advice from those who agree with him."

The dispute over Greece is merely a precursor to what Merkel can expect from the SPD when it comes to EU issues in the campaign. Foreign Minister Gabriel sees two reasons why it is time for his party to assert itself when it comes to Europe. For one, he believes it was a mistake for his predecessor at the Foreign Ministry, fellow SPD heavyweight Frank-Walter Steinmeier, to cede European policy to Merkel virtually without dissention. For another, the minister believes the mood is changing in the country, especially now that thousands of people are marching every weekend in pro-EU demonstrations across Germany and Europe. "There is significant support for Europe on the center-left," says Gabriel. "I think it is possible to win an election on appeals for a more socially minded Europe."

Schulz and Gabriel have agreed on a division of labor. Since his nomination, Schulz has been reserved when it comes to European policy in order to increase his profile on domestic issues. Gabriel, meanwhile, as a cabinet member, is leading the charge against the finance minister. "When Schäuble says 'money alone is not enough,' I counter by saying: 'Austerity alone also isn't enough,'" Gabriel says.

Because UK's departure has torn a hole in the EU budget, Gabriel says, Germany must be prepared "to increase its share." He is also considering the idea of creating a budget for the eurozone that could "for example be financed by higher taxes on the financial markets."

Gabriel wants to stage his pro-EU campaign as an ideological conflict over social issues. "The conservatives are in favor of the most economic competition possible," he says. "We Social Democrats are in favor of an EU pursuing the harmonization of living conditions."

A Social Approach to the European Unión

Gabriel has tasked Foreign Ministry officials with actively shaping the Brussels debate with the inclusion of "pillars of social rights." The paper that was drafted in the ministry calls for "more money for education, mobility and research," among other things. According to the paper, money from the EU budget should be used for the fight against youth unemployment and to combat "developmental shortcomings in poorer regions." All of the portfolios that contributed to the document, including Schäuble's Finance Ministry, agreed to the document's language, but Merkel's Chancellery struck the most decisive sections, including both the broader statements regarding the EU's social dimension and the specific proposals for the upcoming EU budget.

It is clearly a significant conflict over policy direction, but whereas she has avoid conflict in previous such disagreements, Merkel is intent on joining the fray this time.

She agrees with Gabriel that there is a growing sympathy for Europe among large sections of the population. But she doesn't believe that it can be translated into votes in the way the SPD intends, and Horst Seehofer, head of the CDU's Bavarian sister party CSU, agrees with her.

Germans are certainly prepared to demonstrate solidarity with Greece and other countries if they truly pursue reforms, one senior CDU member says. "But I don't think people are waiting to finally spend more money on Europe." He says that Gabriel has gone too far with his demands, given that it is irresponsible to weaken one's one negotiating position on behalf of the Greeks.

Nevertheless, Gabriel's offensive is not inconvenient for Merkel. It makes it easier for her to appeal to grassroots conservatives by campaigning against the SPD's desire for a stronger social net and wealth redistribution. And she can present herself as the middle ground between the SPD, which seeks to solve Europe's problems with reforms and more money, and her party ally Wolfgang Schäuble, who remains in favor of pushing Greece out of the common currency.

It allows her to play her favorite role: the voice of reason.

"A campaign focused on Europe is fine with us," says European parliamentarian Manfred Weber, who is floor leader for the center-right European People's Party in Brussels and a member of the CSU. "We have the support of many voters. Martin Schulz has to declare whether he still thinks that the EU's problems can be solved with more money from Germany."

Even if Germany is of two minds when it comes to showing more solidarity with other EU member states and strengthening social policy, in most other EU countries, the Commission's plans are welcome. In late April, Commission President Jean-Claude Juncker is planning to present concrete proposals for his "European Pillar of Social Rights." "We will be proposing minimum standards," Juncker said during a recent visit to Malta. In November, he is planning on hosting a "social summit" in Stockholm together with Swedish Prime Minister Stefan Löfven.

Juncker continues to be bothered by the fact that millions of mostly young people are still out of work in southern European countries like Greece, Spain, Portugal and Italy. "What is the European Union doing for young people?" is a question that he is often asked in town hall meetings. Juncker believes that a stronger EU focus on social issues is a logical complement to the eurozone.

The commission president initially envisions a greater alignment among countries belonging to the eurozone, with a joint job placement initiative for youth, for example, along with the introduction of minimum salaries in each EU member state.

An Unconventional Campaign

As the first draft of his European Pillar of Social Rights from March 2016 shows, Juncker has set his sights high. The document addresses a comprehensive package of social rights and proposals to create equal opportunity on the job market along with minimum salaries, unemployment benefits and health care. The Commission president hopes that such proposals could take the wind out of the populists' sails. It bothers him, to be sure, that he must continually make exceptions to the Stability and Growth Pact for countries like Spain, Portugal and France - but, he wonders, isn't that better than having Front National win the French presidency?

Merkel's Chancellery views the proposals coming out of Brussels with concern. And the significant disagreement triggered by the Italian government ahead of the recent celebration of the 60th anniversary of the Treaties of Rome remains a sore spot. The Italians sought to formulate the summit declaration in such a way that it reflected Juncker's more socially-conscious vision for the future of the EU. Berlin, though, was adamantly opposed. Ultimately, EU capitals agreed on the formulation: "In the 10 years to come, we want a Union that is safe and secure, prosperous, competitive, sustainable and socially responsible."

The Chancellery sees the declaration as the end of the debate. Juncker, Gabriel and Schulz, by contrast, see it as the beginning.

Germany, as a result, is facing an unusual campaign. The standard conflict between the market and the state will be front and center, but this time it will be focused at the European level. The crucial question is: Are Germans prepared to show more solidarity with Europe? And if so, what do they expect in return?

The answers to those questions may not just determine who will become Germany's next chancellor, but also decide the political fate of the entire continent.

By Horand Knaup, Peter Müller, Ralf Neukirch, Christian Reiermann, Michael Sauga and Christoph Schult

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