“Let it Be” or “Wind of Change”?

Brussels – European Union officials off on their vacation this summer might be truly relaxing and unwinding for the first time in the last few years … partially because they seem set to enjoy some welcome continuity when Germans go to the polls next month.

That compares to August 2015, when Greece was on the brink of leaving the monetary union. Or last summer, which slammed Brussels with the bruising news of Brexit.

Trump’s tirades against free trade and the EU followed, and this spring was marked by nail-biting election campaigns in France and The Netherlands, where eurosceptic populists seemed within a whisker of victory.

But it seems that the tide has turned for the bloc. Disaster was averted in The Hague and a europhile president has moved into the Elysee palace. The EU economy has been steadily growing and unemployment is falling.

Recalibration of German policy is unlikely

More importantly for eurocrat nerves though: German Chancellor Angela Merkel and her Christian Democrats are leading in the polls, and look likely to secure a fourth term, meaning no recalibration of German policy is likely anytime soon.

Even if there was a surprise upset, her main contender, Martin Schulz, the head of Germany’s Social Democrats (SPD) and former president of the European parliament, is considered a friend, not a foe, of the EU.

But, even amid that continuity, there is speculation. Will the next German government emulate the new French President Emmanuel Macron, who is championing change at EU institutions, or will it keep on with the Angela Merkel’s reactive, rather than proactive, leadership style?

Mustafa Rahman, who analyses European politics and political economy for the Eurasia group, says that Merkel’s choice of junior coalition partner could determine the speed and choice of reforms in Brussels, especially if the Finance Ministry were ceded to another party.

If Merkel was set on tackling legacy projects at EU level and do more in Europe, “a grand coalition with the SPD would allow her to straddle the centre ground and get legislation through with a comfortable majority,” says Rahman.

But he says Merkel might not be able to resist a coalition with “more ideological coherence,” such as the Liberal Democrats (FDP).

Rahman says a “repurposing” of the European Stability Mechanism (ESM), the EU’s rescue fund, could be feasible after the election.

“Germany cautious to change the status quo”

Questions as to whether the ESM should acquire the ability to undertake debt management, fiscal surveillance and take on an IMF-like role will be at the heart of the discussion, he says. Germany has been hesitant to go this route so far, but Macron has hinted it is something he would push for.

But when it comes to calls from the US, France and the commission for Germany to tackle its trade surplus and hike investment spending in order to support a more robust recovery in the entire eurozone, hopes for change after September might be misplaced, cautions Guntram Wolff, the director of Bruegel, a think tank focusing on economic policy.

“The experience of the last years shows that Germany has been cautious to change the status quo,” he says.

“That is the natural instinct, and overcoming that logic will be difficult, even if Merkel was committed to going in Macron’s direction.”

And while Schulz has been trying to seize the Macron moment by pledging to increase public spending, Wolff reckons the proposed hikes are not significantly different from what the Christian Democrats are suggesting.

Greek debt crisis and migration are major topics

Another question that is set to resurface after the election is whether debt-riddled Greece should be granted debt relief, a question vehemently opposed by German Finance Minister Wolfgang Schaueble.

“So far, Greek debt relief was a taboo, but after election day, and if Merkel has secured a new majority, there will be a new discussion,” says Hans Stein, regional director for European and trans-Atlantic dialogue at the Friedrich Naumann Foundation for Freedom, which has close links to the FDP.

But, says Stein, the reform that is likely to make or break the union could very well be another one: migration.

“Whatever government will come into office after the September elections will have to confront this question,” Stein says.

He says Merkel will have to forge agreement on a common approach towards migration, asylum and how to protect the EU’s external borders, while at the same time coming up with a new strategy towards North Africa.

“If you are not courageous to tackle these issues, these problems will not go away, whatever other grand reforms are pursued” he warns.

“If the public doesn’t see solutions, we will see a revival of the right wing and a resurgence of populism, despite their defeat in the Netherlands and France.”