Conservatives see measures proposed in the coalition talks as a slippery slope
Wolfgang Munchau
Supporters of Martin Schulz (left) are becoming weary of his broken promises, such as his pledge never to serve under Angela Merkel (right) © EPA
There is something in me that would prefer the members of Germany’s Social Democratic party to vote against a grand coalition with Angela Merkel’s centre-right Christian Democrats. A permanent coalition would end up strengthening the hard left and the hard right. We know that in a democracy, governments tend to produce opposing forces of equal or greater strength, given enough time. This would be Germany’s third grand coalition in 12 years. Better to end this sooner than later.
But there is also something in me that says that this particular coalition might actually do something useful. The chapter in the preliminary agreement on Europe is astonishing. The CDU and SPD accept the principle of a fiscal union for macroeconomic stabilisation, and transforming the European Stability Mechanism (ESM), the rescue fund, into an institution of the EU.
What genuinely surprised me was the initially muted response from the usual suspects on the right. The Eurosceptic backbenchers of the CDU and their Bavarian allies, the Christian Social Union, were unusually quiet. So were the economic commentators in the media. My only explanation is that they either did not read the section, or did not understand it.
The silence ended abruptly last week with an article by Otmar Issing in Frankfurter Allgemeine Zeitung. Mr Issing, a former member of the European Central Bank’s executive committee, rightly recognised the importance of the EU section in the agreement. As an economic conservative he was appalled by the ease with which Germany raised the white flag in the eurozone debate. Banking union, fiscal union, transfer systems — it could all happen very soon. It is what the conservative, ordo-liberal German establishment always fought against. I personally do not agree with their world view, but they are right that the preliminary coalition agreement matters.
This course of events will not go unchallenged. For starters, the SPD membership might vote against the coalition agreement. The Europe section matters more to Martin Schulz than to the average party member. The SPD leader omitted to campaign on this issue in last year’s election campaign. He has lost much of his authority since he left the job of president of the European Parliament to enter German politics a year ago. His supporters are becoming weary of his broken promises, such as his pledge never to serve under Ms Merkel and his promise not to enter a grand coalition as a junior member.
The SPD’s leadership and the outside world are too complacent about the upcoming vote on the coalition. Referendums in parliamentary democracies are inherently unpredictable. With this vote, the party gives its members an opportunity they have not had before. At a single stroke, they can get rid of both their own leader and Ms Merkel. For some, this is a temptation hard to resist.
Another source of obstruction for eurozone reform is the rise of opposition inside the CDU. Mr Issing’s article has stirred up a debate in the party’s Bundestag group as MPs reported that the grassroots are particularly unhappy about the section on the ESM. Ms Merkel pointed out that the Bundestag will retain its veto right on any ESM programmes even if the rescue fund were to become a European institution. She said the ECB is also rooted in EU law, yet independent.
Her response is both true and misleading. Anchoring the ESM in EU law will not change the national veto right over programmes that are funded out of the ESM’s existing facilities. But it opens up new funding channels and decision-making procedures in the future. One has to look at the proposed shift in the legal basis in combination with the plans for a fiscal union. If a newly created fiscal capacity were to backstop the ESM in the future, then surely national governments would no longer have a veto right? It would not be their money any longer.
Mr Issing and other conservatives see the measures proposed by the CDU/CSU and the SPD as a slippery slope towards a regime no longer based on fiscal and financial sovereignty, rooted at the national level, but towards mutual governance. That’s what the debate on the eurozone was always about. It is a variant of the old conflict between federalism and inter-governmentalism. On the specific issue of eurozone governance, German politics is tilting the balance of opinion in favour of the federalist view. For that, and that alone, I would probably buy into the grand coalition, but perhaps not for a full term.
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