Matteo Salvini speaks during an anti-immigration protest in October 2014 in Milan. Long-simmering tensions over the influx of migrants from outside Europe have come to a head in Italy, with the right-wing League allying with the leftist Five Star Movement to rein in immigration and resist pension reforms, with Salvini serving as minister of the interior. Photo: AFP

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Matteo Salvini speaks during an anti-immigration protest in October 2014 in Milan. Long-simmering tensions over the influx of migrants from outside Europe have come to a head in Italy, with the right-wing League allying with the leftist Five Star Movement to rein in immigration and resist pension reforms, with Salvini serving as minister of the interior. Photo: AFP

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Is Europe starting to close its doors to foreign competitors? Recent calls to establish “European Champions” in the wake of the U.S.-led trade wars and an attempt to invigorate flagging economies suggest that Europe is starting to pull up the drawbridge of Fortress Europe. Increasing populism throughout the EU, especially in core economic leaders such as Germany and France, are driving political leaders away from globalist principles and towards a more nationalistic economic strategy.The growing Green party politics at the European and national levels are also helping to restrict foreign market access: raising non-tariff barriers (NTBs) for exporters under the guise of consumer safety and environmental protection. As formerly staunch globalists leave center stage and attacks are made on the existing competition structure in the EU, what political risk might foreign firms face in Europe in the near and mid-term future as these political and economic protectionist movements play out?

Paradigm shift towards protecting domestic/European businesses?

In early February, Germany’s Federal Minister for Economic Affairs and Energy, Peter Altmaier, announced a new industrial policy to protect domestic technology companies. This also includes a potential investment fund to boost their competitive development.  Soon thereafter, France and Germany jointly called for the creation of European “Industrial Champions” that could take on heavyweight companies, especially in the high tech industries, from the U.S. and China.  This strategic shift is in direct response to the U.S.-led, multi-front trade war, but also reflects a new paradigm in the EU. Globalist leaders are losing political clout across the continent to parties on both the right and left edges of the political spectrum. With the UK – traditionally a free-market champion – divorcing from EU economic planning, this Franco-German push for government support for domestic business will have an overwhelming voice in European Union strategic thinking.

France and Germany have faced structural challenges with the competition regulations in the EU, which torpedoed the recent attempt to combine French Alstom and German Siemens into a larger train-producing company. However, in the face of slowing growth and a recognition that the rules of the global trade game are changing, EU nations are hoping to shift to a more Euro-centric and aggressive mode to protect their interests. Back in December, nineteen European member states announced their joint interest in modifying the competition rules in the EU to help facilitate the creation of European powerhouse companies.  More recently, Dutch PM Rutte highlighted that the EU has to get more “streetwise” in competing with other powers on issues of global trade and politics.  The gloves are coming off.

Populist parties as the driving force towards protectionist policies

The Alternative für Deutschland (AfD), as a surging German populist party which did not focus much on economic woes among its voting bloc, nevertheless pulled the national dialogue away form the globalist rhetoric that had been previously espoused by Angela Merkel’s CDU.  Prior to the 2017 elections, the party hung its economic hat on departing the Euro zone, and railed against the Greek bailout which Germany had reached out to finance over the last few years. Now the party has decided to back the German diesel car industry in an attempt to capture voter interest, seizing on the protest movements in France as inspiration for the protection of domestic markets.

As in Germany, the populist movement in France is running on a platform to protect its own national interests over European unity.  Titled ‘intelligent protectionism’, the proposed policies of Marie Le Pen’s National Rally party are intended to shield French industries from outside competition. Le Pen laid out her approach in 2017, and of special concern to foreign businesses is her interest in establishing an Economic Security Agency to limit and monitor foreign investments in France, as well as her intent to force the French state to buy exclusively from French companies. While these approaches would require changes to existing, EU-wide law, the popularity of such approaches in the populist rhetoric across Europe is clear.  Certainly, voters in key nations such as Italy – once a strong and reliable proponent of an integrated EU – will also be willing to consider changes to EU regulation which would give their government greater authority to defend national industries from foreign competition.

The risk of greater government scrutiny and political attacks against “foreign” firms (most of who are of course also registered as European companies) seems to be increasing, especially if they appear to compete with domestic start-ups in the tech area. Attacks on established tech giants over privacy concerns, competition law and taxation issues are well-known. The campaign against Huawei, prompted initially by the U.S. and U.K. and increasingly taken up by continental EU nations, helps to show that many European officials are more comfortable taking a stand against Chinese state-owned enterprises that compete directly with European firms such as Ericsson and Nokia. There is certainly an element of national security driving these public condemnations and concerns, however, economic nationalism undoubtedly flavors the recent actions many EU states are taking, as they strive to keep domestic firms competitive in a tepid EU economy.

Green party politics are limiting market access

Another important element of this shift away from globalization and open markets are the policies of Green / environmental parties in Europe. Both at the national and European level (where the Greens hold only 6% of the seats at the European Parliament, but have grown steadily over the last three elections), Green parties have encouraged policies which serve to limit non-EU business access to the common market.  Programs such as REACH (regarding chemical limitations), phytosanitary restrictions, limitations on packaging, an emphasis on consumer rights and sustainability/fair trade requirements and restrictions on GMO content in food products indirectly limit market access for outside companies that rely on less stringent or politically-driven standards in their home markets.  As the UK – where its Green Party is not as influential as that of other EU countries – is leaving the EU in the next few months, the sway of Green party politics on the European regulatory regime may increase, further closing the European market to outside companies.

How businesses can respond to the risk of Fortress Europe

Apple, Ford and Amazon are identified as U.S. companies no matter how they might be structured, but for the majority of foreign companies, much of the threat of a defensive European market can be rendered toothless by establishing a European corporate arm in the EU or partnering/merging with existing European companies.  For the purposes of public tenders which may see heightened restrictions based on burgeoning populism/nationalism, question of board composition may eventually come into consideration, but for now, flexibility of corporate structure may be the easiest solution. For exporters, the issues are more complex. Facing a “Fortress Europe”, companies will likely see more NTBs and state support to European companies (especially in the tech sector) which will hamper their ability to compete.  Rhetoric against “foreign” companies is an easy balm in election season when the economy is struggling. In the next decade, expect to see European politicians proactively defending national companies and “European champions” over the previous globalization rhetoric as populism swings the economic pendulum towards protectionist policies.

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The German Social Democrats’ (SPD) existential crisis can no longer be treated as a typical party crisis. The party captured a mere 9.7% of the vote in regional elections in Bavaria this month, and it is trailing the populist Alternative fur Deutschland (AfD) and the Greens in national opinion polls.

With another important regional election next week in Hesse, polls indicate that the SPD will lose still more support, though not as dramatically as in Bavaria.

The SPD and the Christian Democratic Union/ Christian Social Union (CDU/CSU) have stood as the twin pillars of German politics since the end of World War II. However, with the SPD declining, Germany is moving from a de facto two-party system to a multiparty system in which no single party plays a dominant role.

The German post-war consensus is collapsing in key areas: history (attitudes toward WWII); geopolitics (attitudes toward Russia); the economy (attitudes toward the car industry); and ethics (attitudes toward refugees).

This is reflected in the fracturing of the political scene.

German voters have rejected the longstanding CDU/ CSU-SPD “grand coalition”. Whereas smaller parties once functioned as mere subsidiaries of either the SPD or the CDU/ CSU, the bit players are now eclipsing the former stars.

Moreover, what was once “Red Munich” has now turned Green. Whereas cities had long been SPD strongholds, they are switching to the Greens and other smaller parties. Making matters worse for the SPD, the demographic profile of its core electorate amounts to a death sentence. Only 8% of SPD voters are under the age of 30, and 54% are over 60. By contrast, just 24% of Greens are over 60. And Die Linke, meanwhile, has become increasingly attractive to younger new leftists and ageing post-communists from the former East Germany.

Just as a two-party system ensures stability and predictability, so might its collapse contribute to radical social change. By definition, the fall of the establishment implies the rise of the anti-establishment, often in the form of populism.

Since 2005, the SPD has participated as the minority partner in three grand-coalition governments. As a result, it has come to be associated with the status quo, even though it hasn’t been able to claim direct credit for the previous governments’ successes.

Something similar happened in Austria, where the Social Democratic Party ruled either alone or in conjunction with the Austrian People’s Party between 1971 and 1999 (except for 1983-1986). Such long periods of grand-coalition rule allowed for the right-wing populist Freedom Party of Austria to present itself as an agent for change.

When a grand coalition is threatened, its members tend to panic. Those who toe the party line lose support, as German chancellor Angela Merkel has. Others thus attempt to appropriate populist language, as CSU leader Horst Seehofer has done in recent months, while still others will try to associate themselves with new political platforms.

Hence, Alexander Dobrindt of the CSU has promised a “conservative revolution,” while Martin Schulz, the erstwhile leader of the SPD, has promoted EU federation.

At any rate, when the constituent parts of a coalition start moving in different directions, things quickly fall apart. Still, it is worth noting that while the SPD and the CDU are currently losing support, their ideas remain popular.

Their problem is not that they are devoid of ideas, but that they lack political credibility.

This credibility deficit has created a vacuum for other parties to fill. Thus, the Greens have made gains in Bavaria by supporting an open-door refugee policy that actually originated with the CDU/SPD.

Likewise, the AfD has wrested the anti-refugee mantle away from the CSU and Seehofer, who went so far as to try to undermine Merkel’s government from within while serving as Minister of the Interior. The common thread connecting all of the parties that performed well in the Bavarian election is that they ran politicians who are at least consistent in their views.

Unfortunately for Germany, multiparty systems are generally unstable and less predictable, which explains why every other European country, Latvia is a current example, constantly struggles to establish a governing coalition.

Under such conditions, it is not uncommon for bizarre arrangements to arise, including coalitions between the far left and the far right, as we have seen in Greece, Italy, and Slovakia.

Germany’s best hope now is that its newly emerging multiparty system will impede the progress of the AfD, by nullifying its anti-establishment appeal. The AfD will take its place on the radical right as one party among many.

Its support will remain in the 10% to 20% range, but it will not go any further than that. In fact, this has already happened in Bavaria, where the AfD garnered 10.2% of the vote this month, down from the 12.4% that it received in last year’s federal election.

Another potential silver lining to a multiparty system is that it might lead to more political engagement. In the case of Bavaria, voter participation rose to 72.4% this election cycle, up from 63.6% five years ago.

Looking ahead, Germany may now end up with rotating coalition governments comprising multiple parties.

For example, one could imagine an arrangement between the CDU/CSU, the Free Democrats, and the Greens – the so-called Jamaica coalition.

However, this scenario would likely produce political paralysis, because politicians from competing parties within the coalition would constantly undercut one another other while pandering to the popular will. Moreover, the chancellorship will always be weaker in a patchwork government.

Most likely, the fall of the CDU/CSU-SPD duopoly will undermine German hegemony in Europe, even if no other country can replace Germany in that role. At the same time, the weakening of the SPD will diminish the socialist faction in the European Parliament, where a similar eclipse of two-party rule could be in the offing.

Yet without the twin pillars of the European People’s Party and the Party of European Socialists, the parliament will be incapable of making even insignificant decisions.

As Germany and the SPD go, so goes Europe.

Slawomir Sierakowski, founder of the Krytyka Polityczna movement, is director of the Institute for Advanced Study in Warsaw and a fellow at the nRobert Bosch Academy in Berlin.

Source: https://www.irishexaminer.com/breakingnews/views/analysis/the-end-of-germanys-two-party-system-is-on-the-horizon-881213.html

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After 13 years in power there is little that chancellor Angela Merkel has yet to do. Yet Wednesday marks a premiere for the German leader: the first-ever question-and-answer session between a chancellor and MPs in the Bundestag.

No one in Berlin expects a House of Commons-style roasting, particularly given Merkel’s fire-blanket rhetorical ability. And yet hopes are high that the session will help return a pulse – and public attention – to German parliamentary democracy.

Leaders of the far-right Alternative für Deutschland (AfD) are licking their lips at the prospect of blaming the chancellor for a growing scandal over major mistakes in the asylum system following the 2015 refugee surge. European allies, meanwhile, hope she will use the opportunity to fill in the many blanks in her vision for the future of the EU.

Eight months have passed since French president Emmanuel Macron’s Sorbonne speech urging the EU be salvaged with a radical leap forward. Even by sober Merkel standards, the chancellor’s responses to date have fallen short, held back first by elections, then extended coalition talks and now by uncomfortable new political insecurities.

Not even a sprawling two-page interview with Germany’s Frankfurter Allgemeine at the weekend provided all the answers on how far the bloc’s powerful leader is prepared to follow Macron on reforms.

ESM fund

A headline proposal of his plan is to transform the ESM bailout fund, born in the euro crisis, into a long-term European Monetary Fund (EMF) to offer member states short- and long-term loans in exchange for reforms. Reflecting disagreement around the continent, Paris and Berlin are still at odds over the terms of the loans, the size of the pot and the EMF’s legal basis.

Germany’s already limited enthusiasm for the EU executive has been dampened even more since the Macron proposals

Merkel says she is open to an EMF giving conditional, limited, reform-linked 30-year loans, as well as shorter-term loans to EU countries “that get into difficulty through external factors”.

The conditions for such shorter-term loans is looser than the “existential” risk required to activate ESM intervention, and has seen ears prick up in Germany. Fearful of a “transfer union” at German expense, many here are wary of the legal basis of any new fund.

The ESM is an intergovernmental construct, outside EU law, and Berlin wants to avoid placing the EMF entirely under the purview of the European Commission.

Germany’s already limited enthusiasm for the EU executive has been dampened even more since the Macron proposals, framed in many circles in Germany as an additional attempt to pickpocket German taxpayers.

Merkel argues the new fund should be “organised between states” and come under “the corresponding rights of national parliaments”. It should act as a second pillar of economic stability in the EU, she suggests, overseeing budgets as well as doling out loans.

That would make it the equal of the commission, infringing on its powers to examine states’ competitiveness and adherence to euro debt rules.

Germany is ready to make a greater financial contribution to the post-Brexit EU budget

She backs the idea of closing development gaps between member states by deploying an “innovation budget for the euro zone”. But, again given personal misgivings and fiscal hawks breathing down her neck, Merkel remains cautious.

She proposes a fund with a “low, double-digit” billion capacity to be introduced on a staggered basis, to evaluate its efficacy. And she left open a major question: whether or not it should be managed inside or outside the EU budget.

Germany is ready to make a greater financial contribution to the post-Brexit EU budget but, with an eye on the ascendant conservative camp inside her Christian Democrats (CDU), the Eurosceptic AfD and the populist Bild tabloid, “how much more is relative”.

‘First answer’

After waiting eight months, the Élysée Palace made the most of the German leader’s “first answer” to Macron’s far-reaching proposals, calling it a “positive move which shows the commitment to Europe of the chancellor and her government”.

At home, indicating the narrow corridor the chancellor has to tread, the modest Merkel proposals annoyed in equal measure both the pro-Macron and anti-transfer union camps.

Christian Lindner, head of the liberal Free Democrats (FDP), suggested Merkel is backing an “overdraft” for wobbly EU neighbours and called for a “return to stability rules”.

Today’s Bundestag question time will likely be dominated by the political fallout of Germany’s asylum scandal and her push for common EU asylum rules. Less interest is likely to be given to her noteworthy backing at the weekend for common EU election lists and a joint EU military intervention force.

But after letting countless opportunities pass, Wednesday’s Bundestag question time provides an ideal stage to put a bit more meat on the bones of Germany’s EU plan.

“Compared to grand words Macron chose, Merkel’s draft appears rather meagre,” noted the Süddeutsche Zeitung on Tuesday. To achieve a compromise, the French leader will have to come down off his rhetorical roof, it added, while “Angela Merkel will have to climb a few stairs”.

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This figure is not new. On the contrary, referred to as “Der deutsche Michel” or “the German Michel,” it was popularized in the 19th century as a character whose limited perspective causes him to shun great ideas, eschew change and aspire only to a decent, quiet and comfortable life.

But Michel has now made a comeback. And who can blame him? Germany now boasts a booming economy, near full employment, rising wages, and content unions. The financial crisis is long forgotten, public budgets are under control, and the 2015 influx of migrants has been relatively well managed.

What bad news there is — industrial scandals (like that at Volkswagen), airline bankruptcies, endlessly delayed infrastructure projects — does little to dampen the general sense of safety and wellbeing enjoyed by Germany’s Michels. The only real threat, it seems, is the world outside Germany’s borders.

In this sense, last autumn’s election campaign was perfectly suited to Germany’s Michels. “A land where we live well and happily,” the campaign slogan of Chancellor Angela Merkel’s Christian Democratic Union (CDU), resonated with them, as did the rather provincial and mostly empty messages of rival parties. With the exception of the right-wing populist Alternative fur Deutschland (AfD), the parties displayed a rote civility and drowsy acceptance of consensus that pacified the electorate.

After the election, the real politicking began, but even then pains were taken to obscure those activities from Germany’s Michels. But Germany’s political class, like its ordinary Michels, is in denial. The soporific federal elections, the breakdown of coalition talks among the CDU, its Bavarian sister party the Christian Social Union (CSU), the Greens, and the Free Democrats (FDP), and the timid dance between the CDU and the Social Democratic Party (SPD) since then all point to a serious deficit in German politics.

The truth is that the various party platforms, which are meant to inform the electorate and provide a basis for coalition talks, reveal a shocking lack of imagination and paucity of new ideas. Second-order issues are presented as red lines, with largely technical questions taking center stage.

A Merkel-led minority CDU government forced to muster coalitions of the willing to address the critical issues confronting Berlin and Europe could free the system from party tacticians and enable real and much-needed reform.

Helmut K. Anheier

Considering the state of Europe and the world, and the hopes many outsiders are pinning on German leadership, these issues seem rather marginal. But the real problem is that they are distracting from larger issues relating to, say, the euro, security and defense, migration, infrastructure, and taxation.

Lacking any forward-looking political visions, German politics has degenerated into tactical plays being carried out by established players. The CDU can live neither with nor without Merkel, while the SPD is unsure of itself and fears further political decline. None of this bodes well for a country whose parliament has already been diminished, after these three parties, during their eight years forming a coalition government, marginalized the opposition and failed to build up new leadership cadres.

Coalition agreements in Germany have always been elaborate documents of a quasi-contractual nature. But there is a growing tendency to plan out four years of governing, with leaders then using legislative periods not to debate laws, but rather to enact previously agreed policies.

Moreover, no major reform has been successfully implemented in Germany since the 2000s, when Chancellor Gerhard Schroeder pushed through labor-market reforms. No forward-looking reforms of the caliber of Schroeder’s Agenda 2010 were even attempted under Merkel in over a decade.

The CDU/CSU and the SPD are now pursuing a grand coalition that would keep Germany roughly on the same path it has taken during the last eight years. The 28-page agreement that will allow formal coalition talks to proceed is overly detailed, technocratic, unambitious, and lacks vision.

It is thus unsurprising that, though CDU/CSU and SPD negotiators have touted the deal as a breakthrough, many, especially in the SPD, are unhappy with the outcome, with some calling for renegotiation. The SPD now faces a choice: At its special party congress this weekend, its leaders must decide whether to join yet another grand coalition government that promises more of the same, or move into opposition, probably triggering new elections.

But there is another option, which many have ignored: a CDU-led minority government, with Merkel as chancellor. Freed of stifling coalition agreements with a reluctant SPD or a coldly calculating FDP, Merkel could choose her cabinet based on competence and vision, rather than party politics. She could even appoint ministers from other parties.

Most important, Merkel could finally tackle the important issues that have fallen by the wayside in recent years, to which the current coalition agreement pays only lip service. This means cooperating with French President Emmanuel Macron to move the European project forward; modernizing Germany’s public administration system; preparing the labor force for digitization; and tackling immigration issues.

Michel may prefer the modest policy initiatives and incrementalism that have characterized Merkel’s chancellorships. But a minority government forced to muster coalitions of the willing to address the critical issues confronting Germany and Europe could escape the constraints of Michel’s expectations, freeing German politics from party tacticians and enabling real and much-needed reform. In other words, the modicum of political insecurity Germany faces today may well be just what the country needs to give rise to new ideas and voices, and a better future.

• Helmut K. Anheier is President and Professor of Sociology at the Hertie School of Governance in Berlin.

Source: http://www.arabnews.com/node/1228461

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