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What a super-charged German Presidency will mean for the EU and Ireland

Chancellor Merkel may be in the waning days of her extraordinary tenure but she has lost none of her influence. Surefooted on COVID, she also ensured that German policy moved towards a more interventionist approach to the recovery phase.

All of this is about to be made flesh as the German Government took over the Presidency of the European Council on July 1st for six months. Merkel has expressed her concern about the unravelling of the single market and about the fragility of the European project.

Even without the Presidency, German influence is everywhere in the EU.

As a new MEP it is hard not to be struck by how German everything really is. There is no leader of the opposition in the Parliament. There is no weekly question time in the Parliament. There is not even a weekly Parliament. The Parliament, like in the German one, meets once a month. The real work, like in the German one, is done in the Committees.

Germans love the EU. As Paul Lever noted in his excellent book, Berlin Rules, “The EU enables Germany to escape from its past and offers it a framework for influencing the world without appearing nationalist in doing so.”

The Euro has delivered more economic advantages to Germany than to any other EU economy.

A few things however have changed since Lever’s book in 2017. While the US is seen as an unreliable partner, China is considered a systemic rival. The EU regularly finds itself having to choose between the two and Germany, and Merkel in particular, are forced to not just influence but to lead.

The survival and strength of the EU is now at issue. Old mantras about avoiding a transfer union have been discarded. New EU funds for supporting unemployment or infrastructure deficits (Next Generation EU) would have been inconceivable before Covid. The new mantra is solidarity and cohesion to face down populists and radicals. This will be what Heiko Mass described as a Corona Presidency.

When the last 7 year EU budget, the Multi-annual Financial Framework (MFF), was being negotiated in 2013-4, David Cameron insisted on no new funds for the EU budget. He was supported vocally by Merkel and of course by Sweden, Netherlands and Denmark. Today, without the UK, Germany is an even greater net contributor to the budget; the scale of the policy change becomes apparent.

So what might all of this mean for Ireland and Micheal Martin when he takes his seat at the European Council on July 17th?

Apart from recovery and public health, Germany will focus on climate, digitisation and strengthening global responsibility. All of this is good news for Ireland and open global trading economies. The German Presidency will turbo-charge the MFF negotiations and this is extremely welcome after many failed negotiations under previous Presidencies.

The priorities for the German presidency will not extend to Brexit.

For the diminishing band of Brexit-watchers, you get the strong impression that Merkel has priced in a hard Brexit and is not willing to spend precious time over the Presidency going through the contortions required to mollify UK public opinion on an acceptable landing ground. It is thought that a ‘like-it-or-lump-it’ approach might be more likely. The failure of last week’s talks did not bode well.

On tax, the Irish Government’s line on waiting for the outcome of the OECD BEPS process was torpedoed last week by the US decision to withdraw from the process. I anticipate that little progress will be made on this agenda ahead of the US Presidential election in November. Pressure will resume in due course for more binding commitments to budgetary discipline and harmonisation of taxes once the Covid crisis is over.

However, the EU recovery programme as currently proposed by the Commission, focuses on new ‘own resources’ for the EU. This means income that can be raised directly by the EU. And this could mean Digital tax. The US withdrawal from the OECD BEPS talks was triggered by EU plans in this regard. I also expect this can to be kicked down the road until after the US election.

Micheal Martin will be the sixth leader on the EU Council aligned to the Renew Europe group alongside President Macron and Prime Minister Rutte. His first task will be to ensure that the distribution of the fund for recovery is related to need rather than historic economic performance. The Irish hospitality and tourism industry will be decimated otherwise.

One way or the other, let’s hope that the high expectations for the German Presidency are not disappointed and ordinary Europeans see the value of sticking together in these extraordinary times.

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