Federalisation of Europe enters mainstream politics

  • Petr Boháček
  • 11.12.2017 18:34

Even though Martin Schulz’s idea of a United States of Europe was dismissed as divisive and unrealistic, it does give more momentum to deeper Eurozone integration. However, Germany’s Social Democrats are not the ones that can advance the agenda on federalisation.

The leader of the Social Democrats (SPD) heralded his big conference speech on 7 December with calls for the creation of a United States of Europe as he asked his party to confirm his leadership and open the door for negotiations about forming a coalition government with Angela Merkel’s conservatives (CDU/CSU). Schulz’s call for federal Europe was rather a political move, not a real appeal. It justified SPD’s attempt to govern with the CDU/CSU again, after four years in the grand coalition led them to their worst election result in history.

 

Schulz will not convince Merkel but he can push her to Eurozone reforms

 

The question of European Federalisation substituted the ineffective and boring campaign agenda on social justice - not much of a topic for Germans nowadays. We need to take responsibility for German and European political stability, the time is now for the historic reform of Europe and we should be a part of it, was the appeal of the party leader. The Social Democrats will not convince Angela Merkel about the idea according words to Schulz’s adviser in the Financial Times. They could, however, be a great internal push for much-anticipated Eurozone reforms.

Smile, Eurozone reforms
Nothing is done yet. The first exploratory talks between the SPD and conservatives start on 13 December and the Social Democrats would have to okay the potential coalition at another party-wide summit. Should that be the case, the SPD together with French President Emmanuel Macron could form a strong duo to push Angela Merkel for more ambitious eurozone reforms and tax harmonisation – a goal the SPD’s policy paper from 4 December specifically highlights. The wide reform agenda, including the creation of a shared Eurozone budget and Finance Minister, is much more likely under the grand coalition than the failed Jamaican coalition. The more controversial transformation of the intergovernmental European Stability Mechanism into a €500bn European Monetary Fund (EMF), an EU-led institution, could be next.

 

The unaddressed elephant in the room remains fiscal integration  

 

While Schulz’s call for a United States of Europe makes for a nice slogan or headline, its real substance and motivations are questionable. Besides other key agendas such as moving towards a true monetary union and creating a banking union, the unaddressed elephant in the room remains fiscal integration.

The largest and healthiest EU economy is built on the eurozone and the single market. Should it keep functioning and thrive with weaker economies, Berlin will have to make significant sacrifices. While the SPD does call for a shared European framework for minimum wage, it stays mute in the debate on fiscal transfers – an adamantly unpopular and untouchable topic in Germany. As a coalition partner, Schulz could push the radical pro-European agenda onto Merkel, weakening her traditional support. Whether he is serious about federalisation remains to be seen but it can definitely serve him well politically.

Bundes Europa
Another problem is who the federalisation talk comes from. The party was a key supporter of the Gazprom-funded Nord Stream 2 pipeline, criticised and rejected by many member states and in logical violation of the unanimous EU stance on Russia. EU sanctions ban the export of gas and oil technologies to Moscow, while Berlin prioritises the economic boost from the gas pipeline construction and its new potential role as a transport hub for Russian gas in Europe. While the EU is not on the path to rid itself of energy dependency on Russia, German position on Nord Stream 2 symbolically puts national interests over the EU-wide position. Hard to rally allies for federalisation with such resume.

It sends a signal that Berlin disregards existential concerns of countries on Russia’s borders. Further, Schulz, as well as SPD’s Foreign Minister Sigmar Gabriel, rejected defence spending increases to 2%. These two things are toxic for Poland. Warsaw will remain sceptical towards Berlin, EU defence integration or the Common Security and Defence Policy exactly for these reasons. The permanent structured cooperation in defence (PESCO), launched officially on 11 December, failed to balance between France’s ambitious projects focused on the Southern agenda and Germany’s inclusiveness for Eastern European member states. Only Slovakia and Latvia were able to present attractive defence projects for PESCO so far. It is hard to argue that there is no East-West division in the EU.

For the strongly Eurosceptic Czech Republic, any talk of federalisation is only deteriorating EU’s image. The ‘get in, or leave’ rhetoric only deepens divisions. However, the debate about European federalisation does need to enter mainstream political discourse across the bloc. But dominant Berlin, carrying the burden of the past, or Germany’s Social Democrats cannot be its authentic leaders. Should a United States of Europe ever be an idea to consider, it needs to bloom outside of the Franco-German dominant duo, ideally in small states of Eastern and Southern Europe.

About author: Petr Boháček

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