Why Ger­many has had enough of Juncker

Financial Mirror (Cyprus) - - FRONT PAGE -

Af­ter the Euro­pean elec­tions of May 2014, and de­spite re­sis­tance from David Cameron, the Chan­cel­lor’s man be­came Com­mis­sion Pres­i­dent. Merkel also gave her bless­ing to the power-shar­ing ar­range­ment whereby Ger­man So­cial­ist MEP Martin Schulz re­tained the pres­i­dency of the Euro­pean Par­lia­ment. But the ro­mance be­tween Brus­sels and Ber­lin was short-lived. Juncker and his team dis­ap­pointed Merkel. And Brexit has­tened the split.

Now, ac­cord­ing to “a Ger­man min­is­ter” cited by The Sun­day Times, the Chan­cel­lor be­lieves “Juncker has time and again acted against the com­mon in­ter­est”, that “he is part of the prob­lem” of the EU and that “the pres­sure for him to re­sign will only be­come greater”.

“The Chan­cel­lor will have to deal with that next year,” the min­is­ter added. These state­ments have since been de­nied by sev­eral rep­re­sen­ta­tives of the CDU, but Ger­many’s con­ser­va­tive press none­the­less picked up on them last week to launch an of­fen­sive against the Lux­em­bourger.

So Juncker finds him­self in the ejec­tor seat, but how has he dis­pleased Ber­lin? To be­gin with, he showed too much in­de­pen­dence. Juncker is a fed­er­al­ist who took se­ri­ously his role as the first “Com­mis­sion pres­i­dent elected by the peo­ple”. As an ex-prime min­is­ter, he also worked to main­tain the co­he­sion be­tween the two ma­jor po­lit­i­cal fac­tions in his team: the cen­tre-left So­cial Democrats and the cen­tre-right Chris­tian Democrats. This fun­da­men­tally cen­trist ten­dency has led him to seek at “third way” be­tween Key­ne­sian­ism and end­less aus­ter­ity. This is the com­pro­mise be­hind the Juncker Plan. It was also be­hind the at­tempt at “armed me­di­a­tion” be­tween Greece and its cred­i­tors in 2015, when Juncker hinted at a non-ex­is­tent eco­nomic re­launch plan. And fi­nally, it was be­hind his de­ci­sion in May to “wait and see” re­gard­ing the Por­tuguese and Span­ish deficits, af­ter tough­en­ing cer­tain mea­sures.

But in seek­ing com­pro­mise Jean-Claude Juncker has sat­is­fied no-one. On the left, he is crit­i­cised for his mi­cro­scopic and fruit­less in­vest­ment plan, his par­tic­i­pa­tion in the black­mail­ing of Greece by its cred­i­tors and the main­te­nance of pres­sure on Por­tu­gal and Spain. Nei­ther has his his­tory of or­gan­is­ing tax eva­sion in Lux­em­bourg been for­got­ten, over which he is sus­pected of play­ing a dou­ble game. On the right, char­ac­terised by the Ger­man min­is­ter of fi­nance, the Com­mis­sion pres­i­dent is now seen as a kind of de­vi­ous, neo-Keyn­sian politi­cian, ready to sac­ri­fice bud­getary rigour and, ul­ti­mately, the treaties, for po­lit­i­cal pur­poses.

For Wolf­gang Schauble, this is the gravest of all mis­takes: mak­ing eco­nomic de­ci­sions for po­lit­i­cal rea­sons. It runs counter to Ger­man lib­er­al­ism, pro­tected by “in­de­pen­dent” in­sti­tu­tions. Lit­tle by lit­tle, Ber­lin has come to see the Com­mis­sion as a threat to the eco­nomic sta­bil­ity of the euro­zone.

On top of this comes the hos­til­ity of East­ern Euro­pean lead­ers, who op­posed Juncker’s “gen­er­ous” mi­gra­tion pol­icy, adopted in the wake of Merkel’s de­ci­sion to wel­come refugees to Ger­many. The Poles and the Czechs were the first to call for Juncker’s res­ig­na­tion. As a re­sult, the sup­port base for the for­mer Lux­em­bour­gish pre­mier has been eroded right back to the lib­er­als and the cen­tre-left politi­cians that op­posed him in 2014.

But Jean-Claude Juncker has also made mis­takes. In one year he has lost three ref­er­en­dums in which he openly took sides: in Greece in July 2015, where he threat­ened to kick the coun­try out of the euro­zone, in the Nether­lands in April this year, Ukraine’s EU As­so­ci­a­tion Agree­ment was struck down, and in the United King­dom on 23 June, where he warned that “de­sert­ers from the EU will not be wel­comed with open arms”, be­fore the UK voted to leave any­way. The Com­mis­sion pres­i­dent ap­pears to break any­thing he touches, but as a fed­er­al­ist, he can’t stop him­self get­ting in­volved in these de­bates.

And his be­hav­iour can be odd. Ex­am­ples in­clude his fa­mous greeting of na­tional lead­ers last year with slaps in the face, as well as some sur­pris­ing speeches. In the Euro­pean Par­lia­ment on 28 June, he turned to Nigel Farage and asked “why are you here?”, be­fore men­tion­ing his dis­cus­sions with “the lead­ers of other plan­ets”. Ru­mours have also cir­cu­lated about his health prob­lems and ab­sen­teeism.

Juncker weak­ened him­self by his own de­ci­sions, so af­ter the EU’s big­gest de­feat since 2005, his po­si­tion is nat­u­rally less sta­ble. He is the per­fect scape­goat be­cause that is what he has made him­self.

An­other post-Brexit fac­tor has fur­ther com­pli­cated the life of the Com­mis­sion pres­i­dent. Juncker is an old-school ad­her­ent of the Euro­pean project: for him, the so­lu­tion to Euro­pean crises is al­ways “more Europe”. This po­si­tion was long sup­ported by Ber­lin. But since the rise of the Eu­roscep­tic right in Ger­man pol­i­tics, this is no longer the case. Merkel wants to re­sist fur­ther in­te­gra­tion, par­tic­u­larly in terms of sol­i­dar­ity within the euro­zone. This leaves Juncker sid­ing with the French and Ital­ian cen­tre-left over deeper euro­zone in­te­gra­tion. It also makes him a dan­ger for the Chan­cel­lor, who clearly sides with her Fi­nance Min­is­ter, Schäu­ble, who re­cently called for a more rigid in­ter­pre­ta­tion of the treaties and the re­place­ment of the Com­mis­sion by a po­lit­i­cally in­de­pen­dent struc­ture that would ap­ply the treaties to the let­ter, with­out po­lit­i­cal con­sid­er­a­tions.

For eco­nomics pro­fes­sor Schäu­ble, this le­gal­is­tic vi­sion of the treaties would be a dream come true. But it flies in the face of Juncker’s dreams of ever closer union.

Merkel is also sen­si­tive to the con­cerns of Ger­man in­dus­try over calls for Brus­sels to “pun­ish” the United King­dom. While the Chan­cel­lor wants to avoid mak­ing any par­tic­u­lar gifts to Lon­don, she is also keen to look af­ter the in­ter­ests of Ger­man com­pa­nies and pro­tect their ac­cess to Bri­tish cus­tomers, their third largest mar­ket.

The po­ten­tially se­ri­ous im­pact of a Bri­tish eco­nomic cri­sis on the fragile Ger­man fi­nances, and par­tic­u­larly on Deutsche Bank, is a sig­nif­i­cant fac­tor in the govern­ment’s per­mis­sive stance to­wards the UK. For Ger­many, there is no ques­tion of treat­ing the United King­dom “like Zim­babwe” or of “breaking the City”, as some fed­er­al­ists had wanted. They are keen to build a com­pro­mise and min­imise the dam­age caused to the UK by Brexit. But Juncker and the Com­mis­sion prove ob­sta­cles in this re­gard.

In the­ory, only the Euro­pean Par­lia­ment can top­ple the Com­mis­sion. But it may still be pos­si­ble for Ber­lin to push the Lux­em­bourger into early re­tire­ment. Having in­stalled Juncker as Com­mis­sion pres­i­dent, Merkel can also unin­stall him. This would achieve sev­eral of her objectives in one fell swoop: it would be a de­feat for the fed­er­al­ists and pro­po­nents of “more Europe”, it would show who is re­ally in charge of the EU ahead of the ne­go­ti­a­tions with Lon­don and it would weaken the Com­mis­sion’s grip on bud­getary over­sight.

The re­moval of Juncker would clear the way for the Ger­man vi­sion: re­form­ing the euro­zone with the es­tab­lish­ment of Schäu­ble’s in­de­pen­dent struc­ture and cut­ting back the Com­mis­sion in the name of min­imis­ing bu­reau­cracy. To please the French and Ital­ians, the new struc­ture could be called a “euro­zone fi­nance min­istry”. But while dressed up as a step to­wards fed­er­al­ism, it would in re­al­ity be an in­sti­tu­tion de­voted to the Ger­man min­is­ter’s ob­ses­sion with bud­getary rigour.

But the threat cur­rently hang­ing over Jean-Claude Juncker may it­self be enough to change things. If the Com­mis­sion on this week de­cides to im­ple­ment sanc­tions against Spain and Por­tu­gal, Ber­lin will al­ready have won an im­por­tant bat­tle us­ing noth­ing more than press ru­mours.

It is be­com­ing in­creas­ingly ob­vi­ous that Merkel’s aim is to shore up the sta­tus quo in Europe, not to change it. A harsh mes­sage sent to Madrid and Lis­bon would clearly sig­nal that Brexit will not lead to greater euro­zone sol­i­dar­ity, as called for by France, Italy and Ger­many’s own So­cial-Democrats.

Juncker cur­rently rep­re­sents an ob­sta­cle to this de­sire for the sta­tus quo, but having al­ready dis­ap­pointed both the left and the right, he is an ob­sta­cle that Ber­lin will eas­ily over­come. If he bends the knee and hard­ens his tone on cer­tain is­sues, as his pre­de­ces­sor Bar­roso did, he will be tol­er­ated.

In the mean­time, the pres­sure on Juncker clearly re­veals the deep di­vi­sions in post-Brexit Europe, on the ne­go­ti­a­tions with Lon­don and the re­form of the EU and the euro­zone. Those that hope to see in­creased sol­i­dar­ity within the euro­zone must take ac­count of the facts: Ber­lin will block any change that is not ac­com­pa­nied by iron bud­getary dis­ci­pline with strength­ened over­sight, amount­ing to the ef­fec­tive aban­don­ment of bud­getary sovereignty. As this is un­ac­cept­able for most mem­ber states, the sta­tus quo, and the weak­ened Com­mis­sion, may sur­vive.

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