“Merkel kicked every box on the road”

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Angela Merkel dominated European politics during her 16-year reign. Many Germans knew her as the ‘crisis chancellor’ because she retained power even as Europe was hit by a series of shocks – from the eurozone crisis and the migrant crisis to Brexit and the pandemic. But after Merkel’s departure from power, many issues raised by these crises remain unresolved.

So how successful was Merkel’s tenure? How will she be remembered in Germany? And what legacy does it leave for the EU?

Wolfgang Münchau is an economist and director of Eurointelligence. sharp caught up with him to get his ideas.

sharp: In what state did Angela Merkel leave Germany?

Wolfgang Munchau: Some people adore Angela Merkel. Some journalists have called her a leader of the Western world. I never bought this. I have followed her since before she was chancellor. She was very adept at reading political trends and managing her position within her party. But she was never particularly interested in problem solving. When the eurozone crisis began, it was she who kicked off. This was essentially the principle of his reign.

Another problem was energy policy. She triggered Germany’s exit from nuclear power before it had a plan to switch from coal. This not only made electricity more expensive, but also made Germany dependent on imported Russian gas. And that meant Germany ended up with one of the worst records for tackling climate change in Europe.

Merkel also failed to modernize Germany. Germany is still in the pre-digital world. The German public sector still depends on the fax machine. Health sector offices are often not computerized. And even Germany’s industrial base still relies heavily on analog technology.

Merkel was essentially a representative of the old business model. She was not interested in innovation. Its main objective was to sell German products to foreign powers.

Germany needs to think deeply about its future. Merkel did not prepare him for this.

sharp: How will the next German government be different from the previous one?

Munich: There will be new faces. But Olaf Scholz, who is most likely to become chancellor, is in the same mold as Merkel.

The new coalition will likely include the Green Party and the Free Democratic Party. These are parties of the younger generation. They are at least trying to find common ground. They have different interests from those of the big parties. They care about internet freedom, data protection, the environment, jobs, income and housing prices. But I have the impression that there will be no fundamental change.

The big problem is that years of austerity have deprived Germany of around half a trillion euros of investment. Now he has to find that investment. Germany has the capacity to reorient the skills of its workers towards modern technologies. But without some demand from industry and government, this transition will be slower.

sharp: What shape is the EU in after Merkel?

Munich: When Merkel took power, the euro was only a few years old. People were pretty complacent about it. But a few years later, it almost collapsed because of the sovereign debt crisis. The reforms needed to make the euro area sustainable have not taken place. They did not happen because Merkel would not invest the political capital necessary to do so. Instead, the European Central Bank has become the system’s safety net. It’s a pretty toxic arrangement. We’ll see that when inflation rises and the bank has to choose whether to fight inflation or save a country from financial collapse.

Every member state has been weakened by the pandemic, but not catastrophically. Obviously, the digital world has accelerated enormously, and countries like Germany were not quite prepared for this. It’s not that easy to organize a Zoom conference when you don’t have a mobile connection. Large parts of Germany are not connected to the Internet.

The EU is not in a bind. It is fantastically rich. But there are unresolved issues in places like Italy. Italy is trying to solve these problems with structural reforms. But I fear it is not achieving the productivity growth rates it needs to get out of the hole it entered when it joined the euro. The economy can become so weak that people wonder if Italy can stay in the euro and if so under what conditions. ‘Italexit’ will not happen. But people are going to ask questions that they haven’t really asked in five or six years.

sharp: Is populism still hurting Brussels?

Munich: Of course, populism in Poland and Hungary is a permanent headache. The Polish Constitutional Court ruled that two articles of EU law do not comply with the Polish constitution. The EU is analyzing what this means, but even if you don’t take it to the extreme, it remains a problem. Notably because it distracts attention from the things to focus on – rising energy prices, the pandemic and a very uneven economic recovery.

There will be challenges from Italy. The Brothers of Italy, the far-right party, have made huge strides in the polls. Matteo Salvini doesn’t vote as strongly as he did, but he still speaks for around 20 percent of the population. And the Five Star Movement is consolidating its position. Italy is a source of instability for the EU.

sharp: UK and EU clash over Northern Ireland Protocol. Will there be a settlement?

Munich: I think they will eventually come to a settlement. The two sides play within their ranks but will eventually strike a deal.

The problem for the EU is that it does not understand Northern Ireland. He thinks so, but no. Northern Ireland is incredibly complicated. You have to understand the story and know quite a few people on both sides to really appreciate it. It is a conflict that has no equivalent in continental Europe and it cannot be measured with the same metrics.

There are some things both parties cannot do. They cannot give up on the European Court of Justice (ECJ). While Northern Ireland is part of the single market, the EU cannot legally exclude its highest jurisdiction there. But there are tradeoffs that can be made. And there haven’t been any CJEC cases in Northern Ireland so far, so it’s a bit of a straw man debate.

The Northern Ireland protocol is complicated. He was accepted because there was political pressure on the UK government at the time, which meant he accepted things that he would not normally accept. But he felt that these things could be sorted out later. The EU does not work like that. He does not sign treaties and then think about how to get around them. Different cultures have clashed here.

I don’t think Boris Johnson’s government is ready to establish a strategic relationship with the EU. That said, the EU has also not been very willing to identify the UK as a potential strategic partner. Instead, he became a player in Britain’s domestic debate, calling for a second referendum on the EU. The Tories and especially Johnson will not have forgotten it. Relationships are bad and it will likely take a generation or two for them to normalize.

Wolfgang Münchau was talking to Paddy Hannam.

Photo by: YouTube / KPMG.


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