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July 25, 2019

What should the EU do now?

It is no secret that Boris Johnson is held in contempt by the chancelleries of Europe. But, whatever EU leaders think of him personally, they will soon be confronted with a formal request to re-open negotiations on the withdrawal treaty. 

EU unity has held up extraordinarily well during the entire Brexit negotiations, but this is because the EU was confronted by a weak negotiator. Olly Robbins gave the game away when he said that either the Commons would vote for the treaty, or Brexit would be postponed for a long time. From the EU’s perspective, this was a game of head-I-win, tails-you-lose. 

But, when confronted with a partner willing to accept a no-deal Brexit, the situation changes. The EU will need to consider, for the first time in earnest, the political dynamics in the European Council in the days and hours before a no-deal Brexit. Are they really prepared for it as they say? Politically and technically? 

We don’t think so. The German media has spent the last two years in denial that Brexit is happening, focusing much of its reporting on the second-referendum campaign. Lately they switched to portraying Johnson as a buffoon or, in the case of Spiegel, as a madman. But what will happen once they realise that Germany is about to face tariffs in the two largest export markets for its cars, the US and the UK? We think that complacency will turn to panic overnight, as it so often does in European politics. The EU will need a strategy to deal with the Johnson administration. EU leaders will need to explore among themselves how far they will go in opening up the discussion on the Irish backstop. And they will need a no-deal strategy that goes beyond the regulatory preparations of the European Commission.

The same applies to the other side. We agree with Ambrose Evans Pritchard, who warned Johnson to heed the mistakes of Alexis Tsipras and of Theresa May: you cannot bluff your way through Brussels. The EU will not be impressed by a threat to withhold the €44bn. But the EU would care about a no-deal Brexit that would bind the UK politically, commercially, and technologically closer to the US. Evans-Pritchard is right in his conclusion that Johnson will need to send out very clear signals of his intentions, and not to oscillate between defiance and submission. 

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July 25, 2019

Could the grand coalition break down over defence spending?

What we know from Annegret Kramp-Karrenbauer so far is that her actions are determined primarily from a desire to serve the much-neglected conservative wing of the CDU. This is also why the defence ministry works for her politically. By reconfirming Germany’s commitment to Nato and its the 2% defence-spending target, she tries to return the CDU to one of its roots in the 1950s. Then it positioned itself as America’s ally in Germany. The SPD-led governments of 1969-1982 maintained that position, and so did Helmut Kohl, but the position shifted under Gerhard Schröder and Angela Merkel. 

In the current grand coalition, defence is one of the politically most sensitive issues. The SPD never accepted Merkel’s 2014 commitment to the 2% Nato defence-spending target. As so often, Merkel gave commitments she knew Germany would not be able to keep for political reasons. Merkel never really cared about the target, but AKK does. She is the only senior politician in Germany who is openly defending it. But this target is technically out of reach because Olaf Scholz has refused the budget increases needed to achieve even a half-way point - an increase in defence spending from 1.2% of GDP to 1.5% by 2023 as requested by Ursula von der Leyen. Instead, the projected ratio of defence spending to GDP will hover around 1.2% - where it has been stuck for many years. 

It will be interesting to see whether AKK is really serious about the target, or whether this is just something she says to satisfy the conservative wing of her party before she goes on to saying something else. But if she is serious about she would have to get Merkel to fire Olaf Scholz, in other words to end the grand coalition. Even if this does not happen, an increase in defence spending could still emerge as one of the CDU’s policy priorities for the next coalition - possibly with the Greens and the FDP. The SPD yesterday reiterated its explicit rejection of the Nato defence-spending target, which it regards as fundamentally incompatible with disarmament and dialogue.

We see the modern SPD as no longer committed to Nato. The party disagrees with not only the spending commitment, but also Nato’s objectives. We specifically question the SPD’s commitment to the principle of collective defence under Article 5 - except in situations where the conflict is far away and does not involve Russia.

Defence is thus turning into one the few ideological divides in German politics, one that was buried in the Merkel years. We think the other big issue will not be immigration, but the protection of Germany’s old industries. On this issue, too, the SPD is carving out a position that will make it harder in the future to forge coalitions with a more conservative CDU.

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