Tuesday, 16 May 2017

After trauma of Lisbon, Macron faces uphill battle for EU treaty change

The new French president may have softened Merkel's resistance to change, but leaders across Europe will be wary of opening a pandora's box.

Emmanuel Macron made his first foreign visit as French president yesterday, coming here to Berlin for a meeting with Angela Merkel.

That Berlin was his first destination is no surprise. The Franco-German relationship is the most important for Paris, and also the most important relationship in the European Union as a whole. But there was an added importance to this first visit. During his campaign Macron made promises about a process of renewal and reform of the EU. None of that will be possible without the cooperation of Germany's chancellor.

We still do not know if Merkel, a conservative, will be that chancellor. Germany is having a general election in September and she may be unseated by her center-left challenger Martin Schulz, a former president of the European Parliament.

As I wrote last week, the preferred partner for Macron's quest for EU reform and renewal will be Schulz. Merkel is pro-EU, but she has been tepid in her support and notoriously cautious and averse to change. Schulz is more fervent in his support for the European project, and as a new chancellor he would bring new energy and a mandate for change.

However the prospect of a Chancellor Schulz is growing less and less likely. Although he received a boost of support when he was first chosen as his Social Democratic Party's leader, the support has since faded. Last Sunday, the same day as Macron's election, his party was defeated by Merkel's Christian Democratic Union in local elections in North Rhine-Westphalia, Germany's most populous state. 

At this stage, it looks like Merkel is probably the partner Macron will have to dance with. But at their joint press conference here in Berlin yesterday, it looked like she may be more open to Macron's ideas than one might suspect.

Merkel may be ready

"We can give the entire [European] construct a new dynamic," Merkel said at the press conference with Macron. "From a German point of view, it's possible to change the treaty if it makes sense".

This last statement signals a significant change in policy - if she really meant it.

Macron has proposed reforming the eurozone to create a real fiscal union, to avoid a repeat of the debt crisis that plagued the EU from 2009 to 2014 (and could flare up again at any moment). He wants the 19 countries using the euro (the ones in blue on the map) to have one single budget process and one single finance minister. He also wants a separate eurozone parliament to ensure that decisions over these common fiscal matters are democratic. 


The idea is that with a common fiscal policy, speculators can no longer go after individual countries for debt problems. It would be a true fiscal block, in the same way that the US states using the dollar have one common federal financial policy and are treated as a single bloc (even though individual US states still maintain control of their state budgets).

Germany wants some of these things as well, but German politicians know it will require rewriting the EU treaties. New treaties would also require national approvals, including referendums in some countries, and politicians are terrified of stirring up this hornets nest again.

German Finance Minister Wolfgang Schaeuble has warned that Macron's reforms would require treaty changes, and this is "not realistic" at a time when Europe is hit by a surge of anti-euro populism. 

Fears of a revolution

Schaeuble is expressing the fears of politicians across Europe. They are still scarred by the experience of the European Constitution, which was rejected by French and Dutch voters in referendums in 2005. 

That constitution eventually morphed into the Lisbon Treaty, which was then only approved by referendum in Ireland after a long and tortured process (it took two tries in Ireland). Historically the EU has updated its central treaties (which serve as its defacto constitution) every seven years or so. Even were it not for the euro crisis, the treaties would be due for an update anyway. But politicians are afraid of what they will unleash.

Macron says he is confident that if the treaty reform process is done in an open and transparent way that involves the public, it will not suffer the same fate as the 2005 constitution attempt. He wants to set up a series of pan-European dialogues as the reform process unfolds.

The problem is that this was tried before. There was a constitutional convention started in 2002 to craft the constitution, and the intent was to involve citizens in that as well. But national leaders made no effort to involve their citizens in the process, or even to tell them it was happening. European media carried almost no coverage of the constitution process.

By the time of the votes on the reforms that the convention had devised, people had no idea what was going on.

But that was 15 years ago. Europe was in golden times, and national European leaders thought they could push forward these reforms without involving the public. Nobody was in the mood to have an open honest adult conversation with their populations about the need for more Europe. Why bother, when everything was going so well? That blew up spectacularly in their faces over the ensuing 15 years.

This time around, national leaders understand much more clearly the importance of involving citizens. And so, perhaps, this time they would do it right.

In addition, the UK was always the biggest obstacle to treaty change throughout the crisis. With the UK gone, that obstacle is no longer in place. Treaty change is much more possible now than it was five years ago.

Still, Macron faces a daunting challenge if he wants to convince his European counterparts that now is the time to engage with treaty change. So far, he has not been afraid to stress to them the urgency of the moment. If they do not do this now, there will be no saving the European project.

France and Germany had come "at a historic moment in their history" he said at the Berlin press conference. Both have a responsibility to fight against populism and restore faith in the European project.

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