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Analysis
Unity push divides Germany

Unity push divides Germany

Merkel's CDU distances itself from Martin Schulz

by David Marsh in London

Mon 18 Dec 2017

Martin Schulz, the battered leader of Germany's Social Democratic Party (SPD), still a partner in Chancellor Angela Merkel's caretaker administration nearly three months after an inconclusive general election, wants a United States of Europe. Theresa May, the British prime minister, simply wishes to maintain the United Kingdom.

The two politicians present a case study of contrasting styles. Schulz, in a speech on 7 December attempting to gain European profile for his party, set out a controversial – and potentially divisive – vision of a European federal state by 2025.

May is battling to maintain a fragile consensus between Northern Ireland and Scotland on the terms of the European Union departure. She lost a landmark vote in the House of Commons on 13 December on giving parliament a final say on Britain's EU exit, but weathered a potentially hostile European summit in Brussels on 14 December.

European leaders voiced their support for May's Brexit strategy. They are discomfited by the possibility that a much more obdurate Brexiteer could replace May if she is defeated in European jousting. On 15 December they formally endorsed the prime minister's accord with the European Commission to go through to the next stages of negotiations in 2018.

If May gets her strategy right, the UK will leave the EU in 2019 (with a roughly two-year transition period) in a break that could be mutually beneficial. If she miscalculates, or meets unexpectedly severe obstacles at home or abroad, in the worst case the UK could break up.

Schulz favours a different form of unity. With extravagant disregard for the extreme improbability of this objective, Schulz says that any EU state foolish enough to disagree with his united Europe proposal would have to have to leave the bloc in eight years. One well-connected German economist said the SPD leader appeared intent on reducing the number of EU adherents still further below the 27-strong membership after Britain leaves.

May, facing her own battle for authority within her own Conservative party and parliament, is adopting a different approach. Whereas Schulz displays categorical – perhaps (in political terms) reckless – directness, May, in her own references to Europe, is an advocate of ambiguity.

Both before and after the June 2016 EU referendum, she has never shown total clarity on whether she wishes Britain within or outside the European single market and customs union. The most probable outcome appears to be a 'halfway house', in which the UK retains access to the single market without being subject to its full constraints.

The Germans, along with most of the rest of Europe (including France), are a long way from supporting Schulz's plan. Merkel's Christian Democratic Union, struggling to find some form of consensus with the SPD to reconstruct a coalition with the party next year, has almost universally distanced itself from Schulz since he made his suggestion. Former Chancellor Helmut Kohl, Merkel's early supporter and mentor, a proponent of greater European integration, gave up the idea as long ago as 1993.

As a result of Schulz's manoeuvre, a reworking of the unpopular 'grand coalition', in power since 2013 – Merkel's second choice after the breakdown of talks with the liberal Free Democrats and the Greens – seems even more improbable.

Schulz has continually opposed a repeat alliance with Merkel and consented to the idea of fresh talks with the CDU and its right-wing Christian Social Union allies only after brow-beating from Frank-Walter Steinmeier, the German president, who wants to avoid new elections.

A minority Merkel government 'tolerated' by the SPD seems more probable. So far, the political uncertainty has had no effect on financial markets or the booming German economy. Up to now, observers have opined that such a deal would at least join together the SPD and the CDU/CSU over European questions. After Schulz's discordant new push for unity, even that outcome seems to be receding.

David Marsh is Managing Director of OMFIF.

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