Germany’s leadership gap

Although Germany’s election results leave Europe’s largest economy in a state of uncertainty, the big picture is already clear: Whoever the next chancellor will be, neither Olaf Scholz nor Armin Laschet will be able to provide the European Union with strong leadership.

This is as much about their inherent political skills as the reality of the coalitions they will lead: made up of parties new to power, and — at the federal level — to each other. Internal friction and domestic politics will subtract from the chancellery’s focus and agency in Europe.

To make matters worse, while it is no surprise that Chancellor Angela Merkel’s departure was going to impact the bloc’s leadership and coherence, her departure coincides with the run-up to French President Emmanuel Macron’s own elections next year.

With the first and second round of presidential voting scheduled for April 10 and 24, and legislative elections in June, these will undermine the substantive policy impact Macron could have had when his country assumes the presidency of the Council of the European Union in the first six months of 2022.

With a lame-duck or weak government in Berlin, soon to be followed by the same in Paris, the EU will be bereft of strong leadership at a time when it could sorely use it.

In particular, there are three areas of European policy — a standoff with the U.K. over the Northern Ireland Protocol, a rule of law dispute with Hungary and Poland, and the need to reform the EU’s fiscal rulebook — that are crying out for a political steer.

The most immediate challenge that Germany’s interim or new government will face is Brexit. The U.K. is waiting for the EU to respond to its “Command Paper” from July, in which Brexit Minister David Frost set out a long list of demands to renegotiate the Protocol.

While the Commission is due to respond to Frost’s proposals imminently, it’s almost certain that Brussels’ attempts to placate the U.K. won’t go far enough. This will certainly be the case regarding London’s attempt to scratch the European Court of Justice from policing the Protocol but will also extend to other areas too.

So far, both Scholz and Laschet have said very little about Brexit, beyond the EU’s oft-used line that they trust the Commission, which remains in the driver’s seat. On Monday, Scholz did use a question about the U.K.’s HGV driver shortage to make a quip about fair wages. But the standoff could get very political, with both Frost and Prime Minister Boris Johnson increasing the temperature ahead of the Tory party conference on October 3-6.

Both Frost and Johnson have insisted in public, and argued in private, that the threshold for triggering Article 16 has been met. Indeed, it’s very possible the government may take the decision to do this next week, throwing red meat to the party’s Euroskeptic base while putting both the opposition Labour party and the EU in a very difficult situation, and conveniently distracting from the fuel and labor shortages at home.

While it would not be automatic, and negotiations would follow, this could put the two sides on an escalating trajectory where trade retaliation becomes inevitable. Neither Scholz nor Laschet has taken a view on this issue, nor provided any indication that they would work to resolve matters as dispassionately as Merkel did.

Though Merkel will still likely be in charge in a caretaker capacity when this sets off, the vacuum in Berlin and Paris risks letting the problem escalate.

While perhaps not the most explosive, the most complex challenge Germany’s new chancellor will face will be over rule of law issues in Poland and Hungary. Regardless of who leads the next government in Berlin, there is a perception that “Merkel let this issue get out of hand,” according to one well-placed senior German official, and that Germany now needs to “course correct.”

This pressure in Berlin will complement developments in Brussels, where the Commission finds itself under increasing pressure from the European Parliament to take a stand against both member countries not to disburse monies allocated to them under the Recovery and Resilience Facility.