Now that Article 50 has been invoked, it is time to consider who will be sitting down to Brexit negotiations with the United Kingdom – no matter what its government looks like after the June snap elections. Among the European Union’s member states, Germany is considered the most influential and the most supportive of an amicable divorce, especially when it comes to a future EU-UK trade agreement. But for various reasons, Berlin may not turn out to be the friend London is hoping for.
Paul Krugman is not the first to observe – and deride – a Kantian element in German politics. In 1999, he argued: “It’s not Karl Marx vs. Adam Smith, it’s Immanuel Kant’s categorical imperative versus William James’ pragmatism. What the Germans really want is a clear set of principles: rules that specify the nature of truth, the basis of morality, when shops will be open, and what a Deutsche mark is worth. Americans, by contrast, are philosophically and personally sloppy: they go with whatever seems more or less to work.”
Krugman has a point. This Anglo-Saxon pragmatism is quite foreign to Germans, especially when it comes to European integration. What Germans mainly hoped to get from joining an “ever closer union of peoples” in the 1950s was an international “Rechtsgemeinschaft” – a community built on the values and principles of the rule of law and the certainty of the law, where the law applies equally to all. That explains why the glaring disregard for rules like the Maastricht debt criteria or the no bailout clause, which should have made the euro as stable as the deutschmark and the European Central Bank behave like the Bundesbank, has been such a shocking experience in Germany – but nowhere else.
In the end, however, Germany grudgingly accepted some “state of emergency” pragmatism to deal with the eurozone crisis, for the sake of European unity.
European unity and stability has been a priority of German politics since the early post-war days of European integration. Back then, Germany’s main goal (and achievement) was to be readmitted into the community of civilized nations. Even today, with some allowance for depreciation, this historical motive plays a role in the country’s politics. Nowhere else can one find such strong evidence for a sort of “sacralization” of the European project, making it almost taboo to question European integration, even where criticism is due or a healthy dose of “sloppiness” could help.
The German position during the Brexit negotiations will be shaped by these same two “typically German” attitudes: stickling for principles and prioritizing European unity.
In terms of principles, Chancellor Angela Merkel and politicians across the German party spectrum made very clear early on that the “four freedoms” of the European single market were “inseparable,” meaning that if the UK wanted to remain a member of the single market for goods, services and capital, it would also have to accept the free movement of EU citizens (along with EU budgetary contributions, EU legislation and European Court of Justice jurisdiction over matters relating to the single market).
More than just a German obsession, this Kantian insistence on principles being applicable to all was widely shared by other member states and, of course, EU institutions. Such categorical consent on the part of the EU27 may have led British Prime Minister Theresa May to drop the “Norwegian” option of leaving the EU while staying in the single market, although this was long held in Berlin to be the best option for everyone – Germany, the EU, and the UK as well.
Meanwhile, Angela and Theresa, both pastor’s daughters (and thus perhaps influenced by Protestant ethics), have made their point. Now it remains to be seen how they (and the many other players) propose to get from their current impasse to a pragmatic solution. On purely economic grounds, it would be reasonable to seek as much free trade as possible with the UK – which, after all, has a sizable current account deficit with the EU27, and especially with Germany.
In terms of political strategy, however, the fear of the Brexit “bug” becoming contagious if the divorce should prove too amicable may well counter economic pragmatism. Swayed by such considerations, EU leaders could play hardball and make an “example” of the British.
There is justifiable worry that the European community could be undermined as a political, legal and economic entity if further exit referenda are used to win special status by way of opt-outs, concessions or rebates. If the UK’s former position of being an EU member while enjoying many opt-outs won only reluctant acceptance, the UK leaving the club while gaining many opt-ins to attractive fields of cooperation is likely to be even more unacceptable.
To be sure, the UK government will have much to offer. It has a wealth of foreign policy expertise, military capabilities and intelligence assets – precisely the areas where the EU is now facing new challenges. And provided that European leaders overcome the fallacy of trade as a zero-sum game, a “wide reaching, bold and ambitious free trade agreement” (Prime Minister May’s main goal) should indeed be in the mutual interest of all parties.
On purely economic grounds, this also holds for financial services. If the EU were to cut itself off from London as Europe’s largest and most attractive global financial center, the damage would be mutual, causing an artificial and costly fragmentation of financial services. But this issue is heavily politicized. Voters may not appreciate Brussels giving post-Brexit “privileges” (passports) to London City’s bankers. At the same time, and with a certain amount of Schadenfreude, German politicians and media outlets are celebrating news that some of these financiers might be relocated to Frankfurt.
In the end, a free trade agreement will probably emerge that entails some compromise between the “four freedoms,” notwithstanding the British decision to leave the single market. Germany can be expected at some stage to throw its support behind parallel Brexit and FTA discussions, to avoid the cliff edge for business on both sides of the Channel. After all, it would be bizarre to deny the UK – one of Germany’s closest and largest trading partners, compliant with EU market regulations since 1973 – greater market access than, say, Canada or South Korea.
Still, the mantra of the “indivisibility of the four freedoms” is likely to reemerge during the Brexit talks, if only because of the categorical imperative that no leaver should be “better off out.” Expect not only Poland or Romania to demand some freedom of movement into the UK. The German government is also likely to press for this, not just for the sake of sticking to principles, but out of self-interest. If the UK were to decide to limit drastically the access of unskilled EU citizens, many would turn to another attractive labor market and even more attractive welfare state: Germany.
Merkel or Schulz?
Will Germany’s general elections in September have an impact on the negotiations? Traditionally, the German center-right and center-left have agreed on playing a constructive role in the EU. Still, in the run-up to the elections, the British should not expect much goodwill from Berlin. Until a new government is formed sometime in October, there will be no settled German position. This effectively reduces the timeframe for pragmatic Article 50 negotiations by half a year.
Yet, the election outcome could make a difference. With the entry into the race of former European Parliament President Martin Schulz, it has become conceivable that Ms. Merkel might not add another four years to her 12 as German chancellor. Merkel or Schulz? Once we enter the phase of serious Brexit negotiations, the difference matters.
If there is one thing known about Martin Schulz’s convictions, it is that he is a diehard EU federalist who has had a fair number of unpleasant encounters with proponents of UK independence in the European Parliament. Mr. Schulz might take some pleasure in punishing the Brits for their decision to leave, if only to demonstrate the superiority of the “European social (democrat) model” to what he dismisses as British “neo-liberalism.” Compared with Mr. Schulz, Angela Merkel can be trusted to take a more pragmatic approach, seeking mutual gains through trade and joint commitments to as many policy projects as possible.
No pain, no gain
Nevertheless, one must not overstate the differences between Ms. Merkel and Mr. Schulz. Both will be ready to sacrifice some economic gains to the political priority of making sure other member states do not perceive leaving the Union as a successful option. And both see “Europe a la carte” as the worst possible model of integration.
It takes a most extraordinary German to be fully in sympathy with the UK, both before and after Brexit. The first to come to mind is Sir Ralf Dahrendorf (1929-2009), whose long life of public service included stints in the German Bundestag and the British House of Lords, the position of parliamentary secretary of state at Germany’s Foreign Ministry, a portfolio in the European Commission, and a directorship at the London School of Economics. In his 1979 Jean Monnet Lecture, Sir Ralf said:
“I have often been struck by the prevailing view in Community circles that the worst that can happen is any movement towards what is called a Europe à la carte. This is not only somewhat odd for someone who likes to make his own choices, but also illustrates that strange puritanism, not to say masochism, which underlies much of Community action: Europe has to hurt in order to be good. … The European interest (it is said) is either general or it does not exist. … I believe that … such a view is not only wrong, but in fact an obstacle to further European integration.”
Published today at Geopolitical Information Service.