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November 01, 2018

Is candidate Merz a keen pro-European?

One important development yesterday was the declaration by Armin Laschet, the premier of North-Rhine Westphalia, not to enter the CDU leadership race. We foresaw that decision yesterday, and we assume that Merz and Laschet have some sort of deal. FAZ also reports that Merz enjoys surprisingly strong support in east Germany. Back when he was the official leader of the opposition, Friedrich Merz once proposed a simplification of the tax code so that people could calculate their income tax liability on the back of a beer mat. FAZ points out this morning that, as a candidate, Merz is too complicated to fit on a beer mat himself. Is he really on the right as everybody supposed? Yesterday he presented his case for the CDU leadership to the public, based on a description of himself as a social conservative but as a pro-European who supports eurozone reform. The eurozone was, in fact, one of the main themes of his presentation. Remarkably, he said the Emmanuel Macron's proposals and the European Commission's white paper both deserved a far more detailed response than the one given by the German government. He said he will make his own proposals on eurozone reforms shortly.

The CDU leadership debate thus transcends the usual left-right classification. We presume that Annegret Kramp-Karrenbauer, a Saarlander, has similar views on the EU. But, like Merkel, she does not appear to be much exercised by policy issues.

FAZ reports on polls that Kramp-Karrenbauer enjoys stronger support than Merz among CDU members, while Merz seems to be leading with the general public. Jens Spahn, health secretary, is a distant third in all polls. We warn readers not to draw any deep conclusions from these initial surveys. The candidates have yet to present their agendas in detail. Merz has so far made all the running in the media. Public opinion, both in the population and in the CDU, has yet to stabilise. And as FAZ points out, many people under 30 will never have heard of Merz. Like Martin Schulz he has emerged as a surprise candidate with a lot of initial fanfare. His leadership bid seems well prepared, but the question is whether he can sustain the initial momentum. 

About the possible deal between Merz and Laschet, one speculation would be with Merz as CDU chief and Laschet as a future chancellor. though this would break with a well-established German tradition of keeping the two jobs together. 

One important consideration for the CDU will be how to reverse the declining trend in the elections and the simultaneous loss of voters to the AfD and the Greens. FAZ reports that the AfD hopes for a victory of Kramp-Karrenbauer, which would ensure that the CDU continues as a centrist party with no conservative profile, leaving the field wide open for the AfD on the right. The AfD is most fearful of Spahn, and somewhat ambivalent about Merz, a candidate they seem to have some difficulty figuring out. 

What to make of Merz’ pro-European convictions? It is worth re-reading the letter in Handelsblatt he co-signed with the philosopher Jurgen Habermas and a couple other German ex-politicians. The authors demand the creation of a European army and eurozone reforms that go far beyond what is accepted by the CDU. 

"We urge the German government to take bold steps, together with French President Emmanuel Macron, to make the economic and monetary union stronger. It must initiate policies leading to more economic convergence across the EU and avert further drifting apart. We need a budgetary policy for the euro zone, which serves the cohesion and sustainability of the whole area. We also need a common labour-market policy, possibly including EU-wide unemployment insurance. Only then will we make European unity credible."

We note that Merz and his generation of west German politicians started out in deep opposition to Helmut Kohl, who dominated the CDU during the years of their political formation. Yet, coming of age himself, Merz now straddles a political spectrum that is very similar to that of Kohl - socially and economically conservative with deep rural instincts, and yet with firm pro-European convictions. The real opposite to Merz is not Kohl but Merkel, whom we would characterise as socially liberal, urban, and unideological. Her support for the EU has been entirely pragmatic, but it was that same pragmatism that led her to frustrate Macron’s reforms which seek lasting solution to stabilise the eurozone.

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November 01, 2018

Around the corner - Brexit edition

If you want to understand EU diplomacy, the first rule is not to trust any pronouncement about the closeness to a deal. We cannot recall how many times European Commission negotiators pronounced that the EU and Greece were close to a deal during the crisis in 2015 - when that was absolutely not the case. When Dominique Raab says a Brexit deal is around the corner, as he did yesterday, this falls in the same category. There is as yet no breakthrough on the vexing issues of the all-UK customs arrangement and the Irish backstop. And, for so long as these issues are not settled, there can be no deal.

So why do negotiators makes those pronouncements? The purpose is to put pressure on the other side to deliver, and to shift blame if the prediction does not come true.

The usually well-informed Peter Foster writes in the Daily Telegraph that discussions are ongoing to circumvent legal issues that stop the EU from agreeing a customs arrangement with no pre-specified end date. That in itself would be a huge concession by the EU. We don’t see it happening as yet. An open-ended customs arrangement, firmly anchored in the withdrawal treaty, would help Theresa May to maximise support for a deal in the UK parliament. But there are legal and technical issues to surmount. Foster writes that there is pressure from member states - we presume that Germany is among them - to find pragmatic solutions to this problem and to move away from the binary nature of the discussions. The UK specifically seeks inclusion of the customs arrangement in the withdrawal treaty, which the EU argues cannot be done under Article 50. 

Andrew Duff explains why the legal problems are not easy to surmount. He writes that the EU has been very good at temporising, but there are both legal and political impediments to granting the UK quasi-permanent access to the customs union. He says the EU is clear on the issue that Art. 50 could allow a temporary customs arrangement, but not a permanent one because the latter would require a full negotiation under Art. 207, 217 and 218. The solution, according to Duff, is an extendable transitional period during which the two sides can negotiate the future customs arrangements. 

The political objections raised by Duff are more serious. France distrusts the perfidious Albion, as the UK is sometimes referred to, while the UK distrusts the EU’s willingness to conclude a trade deal. A deal would require a combination of trust and legal ingenuity. 

We remain confident that a Brexit deal can and will eventually be concluded, but this is not around the corner. This will go into extra time.

We also agree with Duff on his observation of the EU is not playing any role in attempts to frustrate Brexit:

"Like it or not, the EU has to deal only with the British government of the day – a point stressed regularly by the Barnier team to supplicants on day trips to Brussels from the UK’s numerous, but equally ineffective, opposition parties. The EU knows that if Mrs May falls any Tory successor is likely to be even more difficult to deal with. The EU’s one and only goal, therefore, is to reach a deal with the May government under the auspices of Article 50, and to do so within the next six weeks."

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