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How domestic change might shift power relations in the European Council?

Introduction

The European Council plays a central role in defining the common political orientations of the EU. The Council time and again shows this in managing crises at EU-level, for example during the COVID-19 pandemic. With the EU-27’s political leaders represented in the European Council, national inclinations and politics are reflected within the Council, as Member States defend domestic agendas through coalition-building with like-minded countries. Dr2 Consultants’ international team shares some insights on how several upcoming national elections will possibly impact the power dynamics in the European Council.

Changes in the national political arena

With domestic change looming, the power dynamics and coalition-building in the European Council are like to change in the upcoming years. Where the relationship between Merkel and Macron ever more shows the strength of the Franco-German axis in the EU during the recovery phase of the COVID-19 pandemic, German elections this year and next year’s French Presidential elections could mean a blow to this ‘motor of European integration’.

Also, other Member States that took center stage during the COVID-19 recovery fund negotiations are confronted with looming change in national politics. The Netherlands, as the voice of the fiscally conservative “Frugal Four” Member States, will hold parliamentary elections in March, while Italy, as the propagator of more European solidarity, just installed a technical government that should invest Italy’s way out of the crisis.

What to expect?

The months ahead will thus witness major changes in domestic politics of the EU Member States that have been at the forefront of the discussions around the Recovery Fund allocations: namely France, Germany, Italy and the Netherlands. The European Council dynamics will likely change according to the new political setting that will rise in the upcoming months.

Potential power shift on Franco-German axis

The main uncertainties lay on French-German elections, which, depending on the outcome, might lead to a shift in power relations among the European Member States. Macron’s French influence projection is slowly filling the gaps provided by German political uncertainty, while at the same time keeping a close eye of collaboration with its partner. If France were to take a more influential role within the EU, it could steer the European Council in a new direction. For the remainder of Macron’s presidency, France would turn the focus on strengthening the EU’s strategic autonomy, as well building up the EU’s power of decision, especially in urgent matters. However, this rise in level of influence could be completely nipped in the bud if Macron were not to be reelected in 2022, and even more so if he were to lose to euro-sceptic Marine Le Pen.

Potential friction on economic solidarity

The new Italian PM Draghi is also likely to trigger new dynamics in the European Council, due to its experience in EU affairs and fiscal rules observation, which inevitably denote recognition of its political stature. Mario Draghi’s expertise in financial matters could boost Italy’s capacity to make the best use of the EU Recovery Fund allocations, avoiding misuse or bureaucratic loops ending up in unspent resources. Finally, the Netherlands, which has so far been seen as guarantor of fiscal respect, risks being further isolated within the European Council, which could hamper its ability to optimally represent its interests. These political changes could lead to new relations being shaped within the European Council, with the Northern countries losing leverage and the Southern countries gaining ground for a solidarity approach combined with due financial observance.

Dr2 Consultants

Dr2 Consultants’ international team constantly monitors political changes throughout Europe, and the subsequent change of political dynamics at the EU level in order to identify threats and opportunities for its clients. After all, the political consensus in the European Council will in the long run impact the policymaking direction that will be taken by the European Commission.

For the interested reader, a short analysis per country follows below.

Country-specific analyses

Germany – a great legacy for a new Chancellor

On 26 September 2021, federal elections will take place in Germany to determine who will succeed Angela Merkel. A turning point in the history of unified Germany, as the current Chancellor has been in office for more than 15 years. After an internal debate in Merkel’s CDU party, Armin Laschet was chosen as peak candidate, and is likely to run for the chancellorship against the candidate of the current junior coalition party, the SPD Finance Minister Olaf Scholz, and the leader of Bavaria and of Merkel’s CSU sister party, Markus Söder.

The focus on the role of Germany in leading European economic and political integration is of utmost importance, as Merkel’s successor will have to face the rising influence of Macron’s France. The axis with France builds on the historic reconciliation initiated by the Élysée Treaty of 1963 and strengthened by the Treaty on Franco-German Cooperation and Integration of January 2019. This revitalized cooperation inspired the Franco-German initiative for the European recovery from COVID-19 of May 2020, which marked not only a new step in the joint fight against the pandemic, but also a step forward in the Franco-German cooperation. This axis is likely to guide Europe towards a post-COVID-19 era of digitalization and sustainability, combining France’s focus on external relations and defence and Germany’s lead in trade and economic growth of the internal market. The question is whether the German federal elections and the French presidential elections of spring 2022 will bolster this complementarity or result in one country taking the ultimate lead.

France – a quest for influence about to be struck down?

Elected in May 2017, Emmanuel Macron’s mandate as President of France has been marked by several social crises, from the ‘gilets jaunes’ movement that started in October 2018, to the wave of protests against police violence, Islamic terror, and the COVID-19 crisis. Despite being considered as a promoter of economic liberalism within his own country, a position that is increasingly being criticized, at the European level, President Macron has been promoting a stronger fiscal integration of the EU. In this regard, he gained important political ground by getting Germany on board with the EU’s €750 billion NextGenerationEU Recovery Fund, considered as the first step towards European debt mutualization. France, supported by French European Commissioner for Internal Market, Thierry Breton, is also pushing for tech reforms and especially for the EU to become digitally sovereign, ideas that are picking up at EU level. However, some of Macron’s ideas for the EU, such as the development of the European Defence Fund or the Conference of the Future of Europe, have sometimes not amounted to much.

Nevertheless, the consensus between EU officials is that Macron has been the most active of recent French presidents, bringing France to a level of influence (almost) comparable to Germany’s. With German Chancellor Angela Merkel leaving office in September, there could be an opportunity for France to increase its influence.

Macron will be up for re-election in April 2022. Candidates are only slowly starting to declare themselves, but many already foresee a duel between RN’s Marine Le Pen and Macron. If Le Pen, an adamant euro-sceptic, were to be elected, this would drastically impact the relations and power dynamics at the EU level. The Regional and Departmental elections, taking place in June 2021, will provide a first indication of voting trends, a year prior to the Presidential election.

Dutch elections – another four years of Mark Rutte?

With Dutch parliamentary elections about to take place on 17 March, the question rises if Prime Minister Mark Rutte is soon to form what will already be the fourth coalition government under his command. While currently leading a caretaker crisis-management government after a scandal about false accusations of child benefit fraud, his liberal party VVD is most likely moving towards a comfortable election victory. After first assuming the office of PM in 2010, the question is if Rutte will be able to exploit his seniority in the European Council despite diplomatic damage suffered during negotiations about the COVID-19 recovery fund.

The Netherlands was heavily criticized over its lack of empathy as showcased by its “blatant demands” for structural reforms in Mediterranean countries in exchange for economic support from the NextGenerationEU Recovery Fund. This blow to Dutch diplomacy threatens to further isolate the Netherlands in the European Council, especially after the UK’s departure from the EU. Striking a balance between comforting the domestic – somewhat Eurosceptic – public opinion and taking a constructive leadership role at the EU level has been a challenge for Mark Rutte and will most likely remain to be so. It will be interesting to observe if the VVD and its new coalition partners will be able to overcome the traditionally hesitant Dutch stance towards European integration.

Italy – a technical government to lead the way out of the pandemic

Following an internal crisis for allocation of power, a new government under the command of former ECB President, Mario Draghi, took office on 13 February. For the new government, no agreement was found within the coalition, so the Italian Head of State handed the country to a technical government instead of launching anticipated elections – after less than 2.5 years since the last political elections. Supported by an even stronger coalition, PM Draghi has pledged his mandate to four priorities: health, work, EU Recovery Fund and sustainability, to be delivered by a governing team composed of ministries revived from previous governments.

Most importantly, the Draghi government has taken matters into its own hands by placing the Ministry for European Affairs directly under the supervision of the Prime Ministry. In a time of needed European concertation for both COVID-19 vaccination efforts and effective use of the country-allocated EU Recovery Funds, Draghi is likely to manage the Rome-Brussels affairs by himself. With the hope that this is a sign of a reaffirmed participation of the Italian PM into the European Council, and of a stricter observance of the rules for an efficient spending of EU resources.

All eyes on Berlin as Germany starts the Council Presidency

On 1 July, Germany took over the Presidency of the Council of the EU from Croatia, for the second half of 2020, which is already dubbed the ‘Corona-Presidency’. The upcoming six months will bring historic challenges as the management of the recovery from the current health crisis will coincide with some fundamental political choices in the EU, and the outcome will determine the future direction of European integration.

As one of the most powerful Member States of the EU takes over at this crucial moment in time, it will have to play multiple roles at the same time.

Crisis management

First and foremost, the German Presidency will have to play its role as ‘crisis manager’ in the context of the COVID-19 pandemic. Based on epidemiological developments and assessments, the German Presidency will seek to increase coordination in Europe to gradually return to a fully functioning Schengen Area. Furthermore, Germany is expected to lead the politically complicated negotiations on potentially expanding the list of third countries from which travel to the EU is allowed. These priorities will be central during the whole German Presidency mandate.

EU budget negotiations

Germany will also take an active part in managing the negotiations on the new Multiannual Financial Framework (MFF) 2021-2027 and the Next Generation EU Recovery Fund during the summer months. The main challenge will be to find common ground between the hard-hit Member States, such as Italy, Spain and France on the one hand, and the ‘frugal four’ – Austria, Denmark, the Netherlands and Sweden – on the other hand, with the latter group being against grants as part of the Recovery Fund. Germany will be directly responsible for the legislative work on the different sector programs within the MFF (e.g. Horizon Europe, Just Transition Fund and InvestEU) and the Recovery Fund, and will lead the trilogue negotiations with the European Parliament on the financial framework, once there is political agreement on the general features of the future budget. France and Germany expressed their ambition for a quick agreement by end of July, as European leaders are set to meet face-to-face on 17 and 18 July.

Brexit negotiations

With the Brexit transition period ending on the 31 December 2020 and the United Kingdom declining the opportunity to extend this deadline, the German Presidency will have yet another prospective challenge. Once an agreement has been reached at European Commission level, the Member States will have to give their consent. German EU ambassador Michael Clauss stressed that Germany will be exclusively focusing on “brokering agreements between the 27”.

The German Presidency program expresses the Presidency’s ambition for a comprehensive partnership between the EU and the UK. However, it also reads that the Member States will not accept an agreement that would distort fair competition within the Single Market. If there is an acceptable agreement before the end of the year, the German Presidency is expected to align Member States in its role as ‘Brexit-Broker’.

Work program

The work program sets out, in broad terms, the policy priorities for the second half of 2020. In general, Germany will prioritize the digital and green transitions throughout all of its activities. The German Presidency is committed to an innovative Europe based on three pillars: expanding the EU’s digital sovereignty, enhancing competitiveness and a sustainable and stable financial architecture. It will also ensure that the Green Deal’s implementation will contribute to the recovery from the COVID-19 pandemic in Europe.

The German Presidency will have an extremely challenging task of fostering European unity in the budget negotiations in the face of existing difficulties such as the COVID-19 crisis and Brexit. For more information on the German Presidency’s sector-specific priorities, please read our analyses of the German priorities in the fields of digital & tech, sustainability and transport: