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Nicolas Goetzmann: Berlin, capital of Europe?

2020-07-10T15:18:32.167Z


FIGAROVOX / INTERVIEW - From July 1 to December 31, 2020, Germany holds the rotating presidency of the Council of the European Union. According to Nicolas Goetzmann, Angela Merkel intends to use this period to strengthen German hegemony in the EU.


Nicolas Goetzmann is responsible for research and macroeconomic strategy at Financière de la Cité.

FIGAROVOX.- Over the next six months, Germany will assume the presidency of the European Council which will have to deal with various files of great importance, from the European recovery plan to Brexit through trade negotiations with Beijing. How to assess Angela Merkel's approach to these challenges?

Nicolas GOETZMANN.-Indeed, Angela Merkel will have to assume a decisive role in the search for a European consensus in the heart of the Covid-19 crisis. Fortuitously, this German Presidency of the Council comes at a time when the idea that Berlin is truly the nerve center of the power of the European Union is consolidating. This is not really new, but Angela Merkel's crisis management - compared to the other leaders of the big countries as a whole - has had the effect of legitimizing this idea that Germany is the European hegemon. This is all the more problematic since the strategy pursued by Berlin does not seem to me to correspond to the challenges we face. The President of the European Commission, Ursula von der Leyen summed up the challenge of this EU Presidency in her speech on July 2:"It is about Europe's position in the world" . The place that Germany, and by extension Europe, wants to take in the world is that of an export-oriented economy which produces surpluses over its trading partners, which comes down to a so-called "competitiveness" policy. However, the last few years have shown the limits of this approach, both with regard to European dependence on foreign markets, which explains for example our shyness towards China, or even more, the social fractures that these policies cause.

On May 18, the Chancellor joined forces with Emmanuel Macron to formulate a Franco-German initiative for the economic recovery of the continent. Isn't Berlin's rallying, rather attached to the policy of budgetary austerity, to “common European indebtedness” surprising?

Berlin's strategy is a surprise, but whose origins can be traced back to a period prior to the Covid-19 crisis. In February 2019, Peter Altmaier, the Minister of Economy and Energy, revealed his ambitions through a "German industrial strategy 2030" which can be considered as a roadmap of what is being put today in place. This project aimed, for example, to increase the manufacturing sector in German GDP from 23 to 25%, but above all to ensure that this sector rose from 14 to 20% of the GDP of the whole area. So it is indeed a German strategy for Europe. For his part, the Minister of Finance, Olaf Scholz, was able to surround himself with new collaborators, notably Jörg Kukies who instilled a desire to deepen European integration. But this vision should not be idealized, in an interview with the Financial Times, Kukies clearly indicates his wish to strengthen European budgetary rules, pointing to the excessive flexibility present.

Jörg Kukies clearly indicates his wish to strengthen European budgetary rules, pointing to the excessive flexibility currently in place.

On July 18, the Heads of State and Government will meet for a European Council, the subject of which will be the recovery plan "Recovery & Resilience Fund", of which Angela Merkel makes a priority. It will then be important to look at the details; the share of grants and the share of loans, the key to distribution by country, but also the conditionalities that will allow countries to access its funds. Because this stimulus plan should not be used as a binding incentive to "reform" in the direction of pursuing this strategy of "competitiveness".

Germany will have to complete discussions with the United Kingdom, which will leave the common market on December 31. Known for its conciliatory position, will Germany manage to avoid the no deal?

Berlin needs outlets for its production and the United Kingdom absorbs a large part of German trade surpluses. It is therefore likely that a conciliation position will be found at European level, despite some opposition from France. It seems that Michel Barnier, who is negotiating for Europe, has softened his position. Even if David Frost, the British negotiator, has not grasped the extended hand yet, an agreement can still be reached. In this case, the German presidency of the EU can be a facilitating point for the signing of an agreement, especially since the British demands are not insurmountable.

Berlin wants to restore confidence with the local empire, which was damaged by the lack of transparency of the Chinese authorities during the Covid-19 pandemic or by the human rights abuses observed during social movements in Hong Kong. What can it go through?

This question is essential and symbolizes the fragility of the German strategy. Germany has been engaged for almost 7 years in negotiations with China on the question of investment, in the hope of seeing Beijing open more "fairly" to European investments. The idea is to offer a guarantee against forced transfers of technology, blockages put in place by regulation, or the simple theft of intellectual property. At the same time, Chinese investments in Germany have been very significant in recent years, especially in strategic sectors. It is this desire to move forward on this issue and the hopes it arouses in Berlin that leads Europeans to be ever quieter about Beijing's actions. Whether it is the Uighurs, Hong Kong, expansionism in the South China Sea, India, or even the management of the Covid, the Europeans have particularly stood out for their "tolerance" for the actions of Xi Jinping. And this attitude of weakness should not convince Beijing to make concessions. It is therefore surprising to see the Europeans continue to negotiate such a project. The simple follow-up of the negotiations between the United States and China, and in particular between Robert Lighthizer (trade representative of the United States) and Liu He (who took charge of the negotiation on the Chinese side) shows that China will not change its model with regard to foreign investment. Promises can be made, but Beijing's will will remain the same. However, Liu He is also negotiating with Europeans on a similar agenda, it is a question of encouraging European investments in China and of continuing to be able to enter the European market, but the unfair commercial practices which have been going on for two decades now will continue. State-owned enterprises will be massively supported, and the constraints on technology transfer will not stop. On this point, the discourse has changed in the United States on this issue. If the trade war is not officially supported by the American companies present in China, for fear of reprisals on the Chinese domestic market, support has been brought to the negotiators of the Trump administration, in this fight against the unfair practices of Beijing .

The continuation of the negotiations and the silence on the question of human rights shows that Europe wishes to pursue this strategy of "competitiveness" based on exports.

The continuation of the negotiations and the silence on the question of human rights shows that Europe wishes to pursue this strategy of "competitiveness" based on exports. The problem is that it is also a transfer of sovereignty since this strategy is based on the goodwill of foreign countries to buy our goods and services. We depend on foreign demand, which deprives us of more "coercive" means of negotiation. If Europe changed its strategy by relying on a dynamic internal market, rising wages, which would allow us to present a level of consumption and robust investments, then our market would become a real center of attention. Such a strategy would also restore trade balance with the United States, and thus join the interests of two continents, in particular to exert very strong pressure on Beijing. Europe must embark on a “high pressure economy” strategy, in particular by relying on the European Central Bank, which will considerably strengthen the internal market, and allow Europe to enter a logic of power.

Germany also plans to tackle the ecological transition and the digital transition. Is this agenda too ambitious, in your opinion?

Action against coal development in China, and across the Silk Road, should be the priority of climate action. Here again, and since it is about China, the question is ignored. Nuclear development should be the other priority, but this is currently excluded from European climate considerations. Europeans therefore wish to move towards an ecological transition while turning a blind eye to what could be effective. Regarding the digital transition, the problem is somewhat the same. It is staggering to see the weak position in Europe regarding Huawei. European leaders regularly raise the question of "European sovereignty" but while accepting Huawei's participation in 5G infrastructure, even while European companies are present on the market (Nokia and Ericsson who are in this capacity coveted by the United States). All of these inconsistencies, ultimately, rest only on the consequences of this strategy of "competitiveness" that Europeans have been pursuing for several decades.

Source: lefigaro

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