Merkel's running on empty

Sympathisers of German populist party AfD calling for Chancellor Merkel to leave during a protest after the attack at the Christmas market in Berlin last month. The EU today is more vulnerable to external aggression than it has been in 25 years, and
Sympathisers of German populist party AfD calling for Chancellor Merkel to leave during a protest after the attack at the Christmas market in Berlin last month. The EU today is more vulnerable to external aggression than it has been in 25 years, and Dr Merkel's policies have been found wanting.PHOTO: AGENCE FRANCE-PRESSE

If Europe remains under the German Chancellor's leadership, it will be a fading power that can be ignored by both Trump's US and Putin's Russia

One of the most iconic pictures of 2016 is a photo taken at the May Group of Seven summit in Japan. It shows Barack Obama, Francois Hollande, David Cameron and Matteo Renzi smiling and waving at the camera, while Angela Merkel looks on, fingers steepled, in her signature pose exuding both serenity and self-restraint. The men in the picture seemed nervous, and had every reason to be. By year's end, their political careers would all be over, having been forced to make way for populist movements in their respective countries.

Only Dr Merkel has enjoyed staying power, which seems for some reason to have also granted her some moral privilege. A consensus has emerged among foreign policy elites that the departure of her peers has left her as the only person capable of upholding the tenets of the global liberal order. The last hope for the free world, they suggest, rests on Dr Merkel's re-election in September.

Those hopes are dangerously misguided. Giving Dr Merkel the mantle of moral leadership is based on a misreading of her past 11 years in office. It assumes that her three coalitions in Germany and her active steering of the European Union have been unqualified successes. They have not.

Rather, supporters of the liberal order should root for an alternative coalition to take shape, during this year's German elections, which excludes both Dr Merkel and her Christian Democrats from government. A so-called red-red-green coalition - comprising the Social Democratic Party (SPD), left-wing Die Linke and the Greens - offers the best way forward for German democracy, a recalibration of the EU and the future of the liberal world.

FALLING SHORT IN FOUR CRISES

Since the 2008 global financial crisis, Dr Merkel's leadership has been tested on four different fronts: the euro-zone debt crisis, the military conflict between Russia and Ukraine, the Schengen crisis over refugees and intra-EU migration and the creeping authoritarian tendencies of governments in Hungary and Poland. In all four crises, Dr Merkel's governments have dithered and German leadership has fallen short.

Giving Dr Merkel the mantle of moral leadership is based on a misreading of her past 11 years in office. It assumes that her three coalitions in Germany and her active steering of the European Union have been unqualified successes. They have not. Rather, supporters of the liberal order should root for an alternative coalition to take shape, during next year's German elections, which excludes both Dr Merkel and her Christian Democrats from government.

First, during the euro crisis, German insistence on fiscal austerity and structural reform pushed the burden of crisis adjustment squarely onto debtor countries, with disastrous impact on the monetary union's cohesion as a whole. Unlike the United States after the global financial crisis, Germany refused to provide the regional public goods the euro zone needed for a swift recovery. While the US responded to the global panic in 2008 with a fiscal stimulus package and allowed the Federal Reserve to be the global lender of last resort, Germany's role during the euro crisis was austerity for all and a refusal - during the first three years of the crisis - to let the Frankfurt-based European Central Bank use its balance sheet to calm financial markets.

Dr Merkel and Finance Minister Wolfgang Schauble's tough stance vis-a-vis Athens was motivated by the exposure of German banks to the euro periphery, a strict adherence to ordoliberal economic ideas touting balanced budgets and fiscal restraint, and a populist refrain that touted the continent's northern saints and southern sinners. (Ordoliberalism is a German variant of social liberalism that believes deficit spending for demand management is foolish, and that capitalism requires a strong government to create a framework of rules which provide the order that free markets need to function most efficiently.)

A Greek fiscal crisis turned into a full-blown sovereign debt crisis as a result of German insistence on following dysfunctional fiscal and monetary rules. While Germany's economy has fared well since 2010, this has come at the cost of falling living standards, record unemployment and increased euro scepticism across the EU's southern periphery. With no hope of economic recovery, the future of the common currency remains fragile at best.

Second, in the military conflict between Russia and Ukraine, Germany has put all its faith in Nato and economic sanctions and cobbled together a fragile Western coalition. Whatever its moral merits in the abstract, it has had little practical merit. While a brittle truce between Ukraine's warring parties has been upheld so far, the sanctions have given Russian President Vladimir Putin's government the chance to tighten its grip on power at home, without improving Ukraine's hopes of reasserting sovereignty over eastern Ukraine or Crimea. Dr Merkel will have to contend with incoming US president Donald Trump, who has clearly signalled a desire for a rapprochement with Russia. Mr Trump is less interested in continuing the synchronised US-EU economic sanctions regime imposed on Russia, and has signalled his doubts over Nato's ironclad commitment to mutual defence.

With the Russo-sceptic British on the path of leaving the EU altogether, the only hope for a common European foreign policy to influence Russian behaviour is to go back to the Ostpolitik formula devised by Germany's centre-left during the Cold War. That policy was one of "Wandel durch Handel": change through active re-engagement with Moscow. For better or worse, Russia is central to many of the most pressing questions facing Europe, from the future status of Ukraine to the bloody conflict in Syria - and it is a plain fact that it holds greater leverage in these matters. By offering better relations, the EU and the US may give Mr Putin a reason to cooperate with the West. That may also prove naive, as Mr Putin tends to operate by his own set of principles, but it is hard to see how Dr Merkel's antagonistic approach can achieve any improvement to the status quo.

Third, while Dr Merkel's initial "we can do this" stance on Syrian refugees in 2015 earned her plaudits worldwide - with Germany leading the way in taking in more than one million asylum-seekers - her Willkommenpolitik ("welcome policy") would soon U-turn into a cynical grand bargain with Turkish President Recep Tayyip Erdogan to stem the flow of migrants into the Schengen Area. The deal with Mr Erdogan had the EU provide financial assistance and promise future visa-free travel to the EU for Turkish nationals in return for Ankara closing its borders to illegal migrants trying to get to Greece.

While the deal effectively sealed the refugee route to Germany via the Balkans, it did little to tackle the more persistent problem of migrants from Africa coming across the Mediterranean and into Italy. Indeed, it may have made that problem worse by letting people assume the deal with Turkey meant that Europe's migration issues had been "solved". Moreover, the deal rests on shaky foundations, including the illusory hope that an increasingly illiberal Erdogan regime, which is flirting with a reintroduction of the death penalty, could soon accede to join the EU. While neither party has an interest in the deal unravelling, it is a constant reminder of the EU's chronic lack of a common, effective migration policy.

Fourth, neither the EU nor Germany has been able to stop the gradual slide towards authoritarianism in both Hungary and Poland. With Viktor Orban's Fidesz party in Budapest and Jaroslaw Kaczynski's Law and Justice party (PiS) in Warsaw, the EU now counts two illiberal governments among its member states. It is not just that Germany has failed to prevent this from occurring. As the political scientist R. Daniel Keleman has persuasively shown, Dr Merkel's Christian Democratic Union (CDU) has played a crucial role in accommodating Mr Orban's consolidation of power in Hungary - which includes weakening judicial independence and censoring the media. By allowing Fidesz to remain in good standing in the European People's Party (EPP), of which the CDU is the leading member, Dr Merkel put party politics above liberal democratic principles. Mr Orban has thus been spared any real EU pressure - let alone sanctions - to rein in some of his more egregious autocratic instincts at home in return for EPP cohesion and support for crucial votes in the European Parliament.

NO PARAGON OF LIBERAL VIRTUE

By allowing partisan politics at the EU level to permit the spread of illiberalism in Hungary, Dr Merkel opened the door for illiberal tendencies to flourish in other EU member states. Once Mr Orban was allowed to get away with his illiberal practices, Mr Kaczynski's PiS (which is not a member of the EPP) had a powerful ally in Mr Orban's Fidesz. Dr Merkel's quiet accommodation of the Hungarian and Polish leaders hardly make her a paragon of liberal virtue, especially when considered alongside her Faustian bargain with Mr Erdogan.

The inadequacy with which Europe has dealt with its quadruple crisis over the past decade alone calls for fresh leadership in Berlin. Indeed, for the sake of the health of German democracy, a change at the chancellery would be advised. The only realistic way for Dr Merkel to remain in power would be through yet another "grand coalition" with the SPD. This, of course, assumes the CDU rules out governing with the right-wing anti-EU and anti-immigrant Alternative for Germany (AfD) party, which is polling at about 15 per cent of the overall vote. It also assumes a coalition with the liberal Free Democratic Party falls short of a majority, as polls indicate it would. Furthermore, Dr Merkel has stated that the Greens are not her preferred partner.

As political scientist Wade Jacoby argues in a forthcoming article, grand coalitions serve a purpose as long as they are formed with particular bipartisan reforms in mind. But since they take away the crucial element of choice among the electorate, they should only be used sparingly. That was the case for most of post-war German history - until Dr Merkel came to power in 2005. While a coalition between the CDU/CSU and the SPD was tried only once from 1945 to 2005 (in the 1960s), two of Dr Merkel's three coalitions have been such grand coalitions. The fact that both AfD on the right as well as Die Linke and the Greens on the left have seen their electoral fortunes rise proves that Germany is already experiencing voter fatigue with grand coalitions. If Dr Merkel is re-elected, it will only be more of the same, with potentially catastrophic consequences.

The Austrian case should be a warning to Germany. After decades of grand coalitions between centre- right Christian democrats and centre-left social democrats in Vienna, voters have flocked to the far-right Freedom Party. Their candidate, Norbert Hofer, almost captured the symbolic post of the presidency last month, only narrowly losing to independent candidate Alexander Van der Bellen. After 11 years in power, Dr Merkel's CDU has run out of ideas. Over the past 35 years, it has been out of government for only seven years (1998-2005). Only real change in Germany has the potential to break the deadlock in all four crises facing the EU.

The post-war liberal world order was founded on a compromise that granted countries control over domestic policy as long as they moved in a broadly liberalising direction. The EU was that order's finest achievement. But, especially after the Brexit vote, it can no longer be sustained under present German leadership. Dr Merkel has inspired and imposed austerity policies which have been disastrous for the euro zone and rejected systemic solutions to the financial crisis like eurobonds or common deposit insurance. The EU today is more vulnerable to external aggression than it has been in 25 years, and Dr Merkel's moves to further antagonise Russia will only worsen ties. The refugee crisis has not been resolved but merely put on the back burner. And two Central European member states now openly defy the EU's democratic liberal norms. The EU needs a new German-brokered grand bargain, one which entails increased economic solidarity between member states at the price of a truly common EU migration policy with real burden-sharing of refugees. But only after a changing of the guard in Berlin would such a bargain be conceivable.

A "red-red-green" coalition of the Social Democrats, Die Linke and the Greens offers not only a viable alternative to another Merkel-led grand coalition, but Europe's best hope of longer-term survival. A centre-left coalition could end austerity as we know it, offer systemic solutions to the euro-zone and refugee crises, and an end to the cosy relationship with right-wing illiberal democrats in Central Europe.

The ball is in the court of the SPD, the leader of Germany's centre-left. After years of partnering Dr Merkel's party, its own policy profile has been compromised to the detriment of its popularity. It now has an opportunity to make a clear break with the consensus economic policies Germany has pursued over the past decade, and start to champion the reflationary economic solutions that would thrill the party's traditional working-class base and could finally rebalance the euro-zone economy.

If done right, "red-red-green" could give European integration a new lease of life and re-establish the EU as a key pillar of the global liberal order.

What's clear is that if it remains under Dr Merkel's leadership, Europe will remain a fading power that both Mr Trump's United States and Mr Putin's Russia can easily ignore.

WASHINGTON POST

•Matthias Matthijs is assistant professor of international political economy at Johns Hopkins University's School of Advanced International Studies.

A version of this article appeared in the print edition of The Sunday Times on January 01, 2017, with the headline 'Merkel's running on empty'. Print Edition | Subscribe