Tuesday, September 26, 2017

A Faint Glimmer of Hope

Is it possible that my initial reaction was too pessimistic? Might the German election results actually facilitate rather than hinder EU reform? Not if you believe that Christian Lindner of the FDP will be a strong voice in the "Jamaica coalition":

The party’s leader, Christian Lindner, was blunt on Sunday night, repeating his opposition to Mr. Macron’s ideas. Without ruling out all reform, he said that a eurozone budget that could be used to send money to France and Italy “would be unthinkable and a red line for us.”

Mr. Lindner told journalists before the election that he would push for the finance ministry in a coalition. If he succeeds, it may produce little change from the similarly tough-minded Wolfgang Schäuble, who has been Ms. Merkel’s finance minister.
“Will Lindner be tougher than Schäuble?” asked Hans Kundnani of the German Marshall Fund. “Unlikely.”
But consider an alternative scenario: The SDP now goes into opposition and will try to revive its leftish voice, muted throughout the years of the Grand Coalition, a malady that induced leftist laryngitis.

One way to do that would be to call for solidarity among the social democratic parties of Europe. Job creation could be a first priority in such a call, and increased spending on infrastructure--much needed in Germany--could be made a prime policy goal. A European infrastructure fund could be created, to be financed by bonds jointly backed by the member states. These would not be "Eurobonds" per se, since Merkel has already declared her opposition to Eurobonds and Lindner would be even more opposed, but "infrastructure bonds," a modest subterfuge of the sort for which Eurocrats are deservedly famous.

Lindner would still be opposed, but with the backing of the SDP and the Greens, Merkel could finesse his opposition, and it remains to be seen if he would break the coalition over such a difference. Such stimulus spending could be placed under the joint authority of an infrastructure czar, French, and a new EU finance minister (German), thus effecting the kind of structural reform for which Macron is calling. A German fin min would mollify German conservatives and liberals by insisting on rules, while a French czar would be granted a certain discretion in doling out the euros.

Thus the founding tension within the EU would be perpetuated in yet another grand structural compromise of the sort for which the EU is (in)famous. Et voilà: progress snatched from the jaws of reaction. Am I dreaming? Who knows what Merkel really wants? But surely she does not want to see the AfD making further advances, and this will require some creative thinking to accommodate both the diehard advocates of the Schwarze Null and those who believe that something must be done for those deprived of the benefits of Modell Deutschland, the growing ranks of Germany's poor (the poverty rate has increased sharply in recent years despite the growing trade surplus, a sign of the woefully unequal distribution of the rewards of wage restraint).

So there is hope, if Lindner is not feeling too big for his breeches, if Merkel is alert to the opportunity, if Macron does not overplay his hand, and if the social-democratic left rises to the occasion in Germany and elsewhere. A lot of ifs, adding up to a faint maybe.

But it is a hope echoed by the green stripe in the Jamaica coalitiion: Green Party leader Cem Ozdemir, said: “The next government, which we want to join, must support France. There is no other way,” adding that austerity alone was no recipe for Europe.


bert said...

You're not dreaming, if only because much of what you describe already exists.
They're called Structural Funds.
There are of course differences.
I can think of three:

1. They're funded from national tax revenues by net contributors via EU budget payments. These payments, by the way, are required even of non-EU members like Norway. The need for ”cohesion” is always invoked to justify them. It's a quid pro quo for respecting the constraints of the single market.
The constraints of a blog post mean the funding for your proposal isn't 100% clear, but it looks like you're thinking of pooled sovereign debt, perhaps issued by the ECB. A reasonable thing to propose, but don't imagine Lindner would be the only German reluctant to sign up. If you go the ECB route, it's worth remembering what's often forgotten in France, that eurozone membership differs from EU membership (and that's something that won't change with Brexit).

2. They're technocratic. It's the Monnet method, administered by the Commission and insulated from the grubbiness of politics. The effect of your proposal would be to politicise them. Indeed if I understand you right that wouldn't just be the effect but the intention. A highly visible restart of the Franco-German engine. A Frenchman would be appointed to an important new post. Perhaps with a uniform and a plumed hat. Again, reading between the lines, this new official would report to the Council, along the lines of the foreign policy job. Which means you're taking a policy area that's currently bland and uncontentious and seeking to improve it by politicising it and nationalising it. Okay. Good luck.

3. They're divorced from any macroeconomic policy debate. Instead they're part of the accumulated history of give and take, the compromises agreed in the slow buildup of the acquis. Your proposal is to relaunch them as Keynesian demand management. (You use the word ”stimulus”.) This blows a hole in the idea that this might be a modest compromise, on which agreement might be reached without political pain. It is in fact the whole ballgame. The Germans have been very successful in nailing down monetary policy in rules and laws which reflect their preferences. Any attempt to open a new front on fiscal policy will be fought. And during the last eurozone crisis the Karlsruhe constitutional court was used very effectively to deliver German policy outcomes.

I'll stop there. I don't want to give the impression that I'm pissing on your campfire. The fact that you rest your hopes on the SPD (to be excluded from government) and the Greens (to be excluded from economic policy) suggests that you see progress on this less as an immediate deal to shape the new coalition and more as a longer term roadmap for those planning a different world to the one we're currently stuck with.

Geoffy4T said...

Interesting that most of the article, in a blog about French politics, is devoted to Germany. Such is the state of Franco-German [Franco-Prussian?] relations. A point the author did not touch on: the AfD's base is in East Germany, Angela's homeland. I would think her instincts then would be first and foremost to stifle them [AfD] now, a strategy more likely to make her tack right, not left. She will want to keep the FDP happy, with a hope that they might pull some votes from AfD. Problem is, I don't think Patience is one of Macron's strong points. And even more worrisome, domestically, he needs to deliver now.

Tim said...

The problem with infrastructure as I see it is it is a typically American Liberal idea that doesn't directly apply easily to France. France in fact has had massive infrastructure spending programs under both Hollande and Sarkozy even during periods of austerity. For example the Grand Paris Metro project which will be ongoing into the next two decades plus some big TGV and RER projects that have just wrapped up. The caveat to this is one place in Europe that could use much more infrastructure spending is Germany itself. German infrastructure simply put is no longer as "good" as the rest of the world has been led to believe. However, I wonder how well a French infrastructure "czar" would handle Germany's infrastructure problems. A lot of the problem with building new infrastructure in Germany vs France is nimbyism and environmental assessment issues which the German Green Party is probably going to be pretty hung up on compared to the French political mainstream.

Tim said...

A second point I will make that Art probably won't like is the activist left in Europe(i.e. people like Thomas Piketty and Gabriel Zucman) need to decide what they are going to do about Trump's America. Piketty and his friends in the Nationale Assembly has spent every year since 2010 basically hoping for a Democratic Congress and Democratic President to come back to Washington, DC with little to show for it in order to move forward on their global tax, banking, and inequality agenda. Along these lines Macron's Silicon Valley "tax" is dead in the water unless Macron wants to take the fight to Paul Ryan, Mitch McConnell and Trump which I have not yet seen him willing to do. Instead Macron like Piketty seems to hoping for a Democratic Congress and Democratic President to some day take over so he and Bruno Le Maire can keep the Silicon Valley tax promises. The road to success for Macron might very well lie through Washington, DC NOT Berlin.

**BTW, I am a part time lobbyist in tax and banking issues working in Washington, Brussels, and Paris frequently so this is a bit more related to my day job.

bert said...

Good points, Tim.
Infrastructure spending is the one part of the Trump agenda that might still plausibly get bipartisan support.
The defence budget is backed on a bipartisan basis too - it's federal spending, supported by both parties for use as pork. I remember Art supporting renewed European defence integration in part as a useful receptacle for stimulus spending.


To be clear, any cognitive biases I may have are excused by the flawless way they align with reality.
Also: German broadband is garbage, German cellphone service scarcely any better.

Tim said...


A couple of more things to keep in mind.

1. The National Capitol bias in infrastructure spending helps more people in France than the US as Paris is much larger and a higher percentage of the population of France than Washington DC is of the US. Both France and the US have always spent a LOT more money in infrastructure in Paris and DC respectively. CDG Airport when it was constructed in the mid to late 1960s was France's response to the Aero Saarienen designed Dulles Airport in DC being opened a few years earlier. It also also worth noting that the DC Metro is called a "Metro" not a subway or underground. It is obviously the DC Metro were thinking of another capitol city when designing it(Actually Moscow and Paris were the two big influences of the construction of the DC Metro in the 1960s).

2. There are quite a few studies out there that show that building a KM of road or a KM of railroad in France is quite a bit cheaper than the US. This has the effect of making France more efficient than the US but there is also less economic froth to help the general economy. Hence the French tradition of being a "rich" country with high unemployment.

3. Most French infrastructure tends to have revenue stream(i.e toll roads) behind it and stays off the books of the general funds(with only "minority" contributions from the state). Thus a lot of funding for infrastructure has gone forward even during the austerity years as it funding is off balance sheet. This same model of funding though doesn't really exist in Germany and in the US where it has been tried through public authorities like the NY Port Authority, MA Port authority, MA Water Resources Authority, MA Turnpike, etc it tends by controversial due to the high handed way public authorities have often behaved. For different reason culturally and politically this high handedness doesn't exist or is not nearly as unpopular in France especially for national "prestige" projects.

Robinson said...

Lindner is only half the problem. His position is strong because, when it comes to the Eurozone budget, he speaks not just for the FDP but for a majority of German voters. He also speaks for a majority of CDU and especially CSU officials: Merkel is on her party's left, and she is likely on her way out.

The institutional arrangements Art describes, or something like them, may indeed be approved, but Germany will only consent to them if the budget is so small that it does not amount to much. The Greens are the only German party that is pro-European in the decisive sense of being explicitly willing to transfer more money to the indebted nations of Souther Europe. I, too, hope that the SDP re-emerges. Surely, however, the way for them to win votes is to fight wage restraint within Germany, not to promise more money to foreigners.

Anonymous said...

Solidarity among the social democratic parties of Europe? What social democratic parties? Almost none of them are anywhere near power.

As for the AfD: Merkel won't win back a single far-right voter by making concessions to France on European budgetary matters. On the contrary, this sort of a move will help the AfD (and conservatives in her own party). The working class German voters Art have suffered from wage restraint, but they won't directly from more European solidarity and they don't support it. Perhaps Merkel should bite the bullet and support more Euro solidarity in spite of the recent election, but she has limited room for maneuver.

Macron could have gotten something like what he wanted from Red-Red-Green or maybe Black-Green. For the moment the scenario Art describes is a long way away.