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03/12/2016

Why Germany has had enough of Juncker

Euro & Finance

Why Germany has had enough of Juncker

Jean-Claude Juncker has attracted criticism over various issues from both Europe's right and left.

[European Union]

According to The Sunday Times, Angela Merkel sees Jean-Claude Juncker as “part of the problem” with the EU. But it was she who installed him at the head of the European Commission in 2014. So why the change of mind now? EurActiv’s partner La Tribune reports.

Jean-Claude Juncker was chosen as the European People’s Party’s “Spitzenkandidat” (lead candidate) for the European Commission presidency by Angela Merkel in March 2014. This was not due to any great enthusiasm for Luxembourg’s former prime minister on her part, but rather to the desire to block the candidacy of Michel Barnier.

France’s former European Commissioner was deemed unsuitable for the top job on two counts: a lack of budgetary orthodoxy (he is French after all) and a desire to over-regulate the financial sector (he was behind a European banking separation project that Berlin and Paris worked so hard to bury).

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The end of a friendship

After the European elections of May 2014, and despite resistance from David Cameron, the Chancellor’s man became Commission President. Merkel also gave her blessing to the power-sharing arrangement whereby German Socialist MEP Martin Schulz retained the presidency of the European Parliament.

But the romance between Brussels and Berlin was short-lived. Juncker and his team disappointed Merkel. And Brexit hastened the split.

Now, according to “a German minister” cited by The Sunday Times, the Chancellor believes “Juncker has time and again acted against the common interest”, that “he is part of the problem” of the EU and that “the pressure for him to resign will only become greater”.

“The Chancellor will have to deal with that next year,” the minister added. These statements have since been denied by several representatives of the CDU, but Germany’s conservative press nonetheless picked up on them last week to launch an offensive against the Luxembourger.

Seeking compromise

So Juncker finds himself in the ejector seat, but how has he displeased Berlin? To begin with, he showed too much independence. Juncker is a federalist who took seriously his role as the first “Commission president elected by the people”.

As an ex-prime minister, he also worked to maintain the cohesion between the two major political factions in his team: the centre-left Social Democrats and the centre-right Christian Democrats. This fundamentally centrist tendency has led him to seek at “third way” between Keynesianism and endless austerity.

This is the compromise behind the Juncker Plan. It was also behind the attempt at “armed mediation” between Greece and its creditors in 2015, when Juncker hinted at a non-existent economic relaunch plan. And finally, it was behind his decision in May to “wait and see” regarding the Portuguese and Spanish deficits, after toughening certain measures.

Not pleasing anyone

But in seeking compromise Jean-Claude Juncker has satisfied no-one. On the left, he is criticised for his microscopic and fruitless investment plan, his participation in the blackmailing of Greece by its creditors and the maintenance of pressure on Portugal and Spain. Neither has his history of organising tax evasion in Luxembourg been forgotten, over which he is suspected of playing a double game.

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On the right, characterised by the German minister of finance, the Commission president is now seen as a kind of devious, neo-Keynsian politician, ready to sacrifice budgetary rigour and, ultimately, the treaties, for political purposes.

For Wolfgang Schäuble, this is the gravest of all mistakes: making economic decisions for political reasons. It runs counter to German liberalism, protected by “independent” institutions. Little by little, Berlin has come to see the Commission as a threat to the economic stability of the eurozone.

On top of this comes the hostility of Eastern European leaders, who opposed Juncker’s “generous” migration policy, adopted in the wake of Merkel’s decision to welcome refugees to Germany. The Poles and the Czechs were the first to call for Juncker’s resignation. As a result, the support base for the former Luxembourgish premier has been eroded right back to the liberals and the centre-left politicians that opposed him in 2014.

EU's Juncker under pressure to resign after Brexit vote

Pressure is building on Commission President Jean-Claude Juncker to resign following the UK referendum, but also over the need to “change the habits” of his way to run the EU executive over the last two years.

EurActiv.com

Repeated mistakes

But Jean-Claude Juncker has also made mistakes. In one year he has lost three referendums in which he openly took sides: in Greece in July 2015, where he threatened to kick the country out of the eurozone, in the Netherlands in April this year, Ukraine’s EU Association Agreement was struck down, and in the United Kingdom on 23 June, where he warned that “deserters from the EU will not be welcomed with open arms”, before the UK voted to leave anyway. The Commission president appears to break anything he touches, but as a federalist, he can’t stop himself getting involved in these debates.

And his behaviour can be odd. Examples include his famous greeting of national leaders last year with slaps in the face, as well as some surprising speeches. In the European Parliament on 28 June, he turned to Nigel Farage and asked “why are you here?”, before mentioning his discussions with “the leaders of other planets”. Rumours have also circulated about his health problems and absenteeism.

Juncker weakened himself by his own decisions, so after the EU’s biggest defeat since 2005, his position is naturally less stable. He is the perfect scapegoat because that is what he has made himself.

Berlin against eurozone integration

Another post-Brexit factor has further complicated the life of the Commission president. Juncker is an old-school adherent of the European project: for him, the solution to European crises is always “more Europe”. This position was long supported by Berlin. But since the rise of the Eurosceptic right in German politics, this is no longer the case.

Merkel wants to resist further integration, particularly in terms of solidarity within the eurozone. This leaves Juncker siding with the French and Italian centre-left over deeper eurozone integration. It also makes him a danger for the Chancellor, who clearly sides with her Finance Minister, Schäuble, who recently called for a more rigid interpretation of the treaties and the replacement of the Commission by a politically independent structure that would apply the treaties to the letter, without political considerations.

For economics professor Schäuble, this legalistic vision of the treaties would be a dream come true. But it flies in the face of Juncker’s dreams of ever closer union.

Germany resistant to hard line against London

Merkel is also sensitive to the concerns of German industry over calls for Brussels to “punish” the United Kingdom. While the Chancellor wants to avoid making any particular gifts to London, she is also keen to look after the interests of German companies and protect their access to British customers, their third largest market.

The potentially serious impact of a British economic crisis on the fragile German finances, and particularly on Deutsche Bank, is a significant factor in the government’s permissive stance towards the UK. For Germany, there is no question of treating the United Kingdom “like Zimbabwe” or of “breaking the City”, as some federalists had wanted. They are keen to build a compromise and minimise the damage caused to the UK by Brexit. But Juncker and the Commission prove obstacles in this regard.

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Ending the Commission’s budgetary oversight

In theory, only the European Parliament can topple the Commission. But it may still be possible for Berlin to push the Luxembourger into early retirement. Having installed Juncker as Commission president, Merkel can also uninstall him.

This would achieve several of her objectives in one fell swoop: it would be a defeat for the federalists and proponents of “more Europe”, it would show who is really in charge of the EU ahead of the negotiations with London and it would weaken the Commission’s grip on budgetary oversight.

The removal of Juncker would clear the way for the German vision: reforming the eurozone with the establishment of Schäuble’s independent structure and cutting back the Commission in the name of minimising bureaucracy. To please the French and Italians, the new structure could be called a “eurozone finance ministry”. But while dressed up as a step towards federalism, it would in reality be an institution devoted to the German minister’s obsession with budgetary rigour.

What if the threat was enough?

But the threat currently hanging over Jean-Claude Juncker may itself be enough to change things. If the Commission on this week decides to implement sanctions against Spain and Portugal, Berlin will already have won an important battle using nothing more than press rumours.

It is becoming increasingly obvious that Merkel’s aim is to shore up the status quo in Europe, not to change it. A harsh message sent to Madrid and Lisbon would clearly signal that Brexit will not lead to greater eurozone solidarity, as called for by France, Italy and Germany’s own Social-Democrats.

Juncker currently represents an obstacle to this desire for the status quo, but having already disappointed both the left and the right, he is an obstacle that Berlin will easily overcome. If he bends the knee and hardens his tone on certain issues, as his predecessor Barroso did, he will be tolerated.

Europe divided

In the meantime, the pressure on Juncker clearly reveals the deep divisions in post-Brexit Europe, on the negotiations with London and the reform of the EU and the eurozone. Those that hope to see increased solidarity within the eurozone must take account of the facts: Berlin will block any change that is not accompanied by iron budgetary discipline with strengthened oversight, amounting to the effective abandonment of budgetary sovereignty. As this is unacceptable for most member states, the status quo, and the weakened Commission, may survive.

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