Forecast
- As France and Germany prepare for general elections in 2017, they will have a harder time reaching a consensus on EU issues.
- The Continental bloc is unlikely to pass any significant reforms until at least late 2017 when French and German elections are over.
- Moderate parties will rule France and Germany after 2017, but Euroskepticism will continue to grow in both countries.
Analysis
Campaign season is fast approaching in France and Germany, Europe's biggest political and economic heavyweights. As political parties in both countries maneuver to secure victories in their respective general elections, set for 2017, consensus will become increasingly difficult to find on the Continent. Paris and Berlin will each present new proposals to knit the European Union closer together, but with Euroskepticism rising on both sides of the Rhine, agreements to that effect will be tough to achieve. Stalled cooperation between the Continent's largest players will do little to help Europe reverse its fragmentation and face its challenges — especially if France and Germany's commitment to keeping the European Union united begins to fade.
Fending off the Opposition
Next year will be crucial for the European Union as the French and German votes shape the bloc's path for the rest of the decade, if not beyond. France will set things in motion with its presidential election in April and May, followed closely by National Assembly elections in June. Germany will feature more prominently in the second half of the year, holding parliamentary elections sometime between August and October. But the effect of the votes will start to be seen well before balloting actually takes place. French and German politicians are already calculating how best to win voters' support, and the effects of their decisions in the lead-up to the 2017 elections will ripple throughout the European Union over the next year and a half.
You may also like Global Liquidity Conditions Still Negative
Germany and France are currently in very different economic situations. The German economy is faring well relative to those of its European counterparts; it grew by 1.7 percent in 2015 and is expected to see similar growth in 2016. Germany's unemployment rate, around 5 percent, is one of the lowest on the Continent, and in 2015, Berlin reduced its deficit to zero, the first time the German government had balanced its budget in four decades. France, by contrast, is struggling to achieve modest economic growth and address pervasively high unemployment levels. According to Eurostat's projections, which tend to be optimistic, the French economy is expected to grow by only 1.3 percent this year — well below the eurozone average of 1.7 percent. Meanwhile, more than 10 percent of France's active job seekers continue to search for employment.
Despite their differences, Germany and France are facing similar political shifts among their populations. Voters are growing tired of the ruling parties, and they are turning to opposition forces — some of which reject various aspects of EU integration — for alternatives. No matter the fates of German Chancellor Angela Merkel and French President Francois Hollande, the common ground that enables their governments to jointly lead the European Union will become harder to find. And once campaign season is over, a Franco-German accord may prove even more elusive.
France's Political Paralysis
The French economy's lackluster performance has made Hollande's government one of the least popular administrations in Europe. After running on promises to avoid austerity measures and tax the rich in 2011, his Socialist Party made an abrupt about-face in 2014, passing several laws aimed at liberalizing the economy and making it easier for companies to fire their employees. That led to street protests and stiff resistance from the ruling party's left-leaning factions. Hollande's subsequent decision to approve the most controversial measures by bypassing the National Assembly did little to soothe discontent among his party members and the public.
Now Hollande's government is at risk of becoming paralyzed, and the president's recent labor reform will probably be the last significant policy of his term. The Socialists are in a distant third place in French opinion polls, far behind the center-right Republican Party and the right-wing National Front, which are neck and neck for the lead. The outcome of the race could have far-reaching implications for both France and the European Union since the National Front has vowed to hold a referendum on the country's membership in the bloc. Some segments of the Republican Party are critical of the European Union as well.
Read Utopia Meets Reality in the EU
That said, the contest for the presidency is far from decided. Two of France's three major political parties have yet to choose their candidates. Though Hollande is eligible for re-election, there is no guarantee that the Socialists will back him a second time. Some of the party's more prominent members, including Economy Minister Emmanuel Macron, could challenge the president's leadership of the party or run independently, siphoning votes away from the Socialists.
Meanwhile, the Republicans are slated to select their presidential candidate during party primaries in November. Former Prime Minister Alain Juppe, a major Republican contender, is more supportive of Continental integration than party leader and former President Nicolas Sarkozy, who has repeatedly criticized the Schengen Agreement and defended the return of some powers from Brussels. (It is important to note, however, that Sarkozy has yet to declare his intention to run for office.) Other candidates, such as former Agriculture Minister Bruno Le Maire, have suggested holding a referendum on France's role in the European Union. Regardless of who wins the party's backing, the Republicans will struggle to reconcile their members' conflicting views on the Continent's future.
Of France's three biggest parties, only the National Front's leadership has been decided; the party has already selected Marine Le Pen as its presidential candidate. Of course, the country's two-round electoral system will continue to block the National Front from winning the presidency or a significant number of seats in the National Assembly. The party is still an influential force in French politics, however, and its growing strength has already forced the center-right to adopt elements of its nationalist agenda. As a result, friction between France and Germany will probably rise after the next French government is put in place, even in the likely scenario that the National Front remains within the opposition.
Germany's Political Fragmentation
Though Merkel is not nearly as unpopular as Hollande, support for her government is nevertheless declining. Germany has been ruled by a coalition of the country's main center-right and center-left forces for more than three years, a situation that is making both sides increasingly uncomfortable. Some members of the center-right Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union, believe Merkel has moved too close to the center-left by introducing a minimum wage, lowering the retirement age and supporting Greece's bailout programs. The center-left Social Democratic Party (SPD), in turn, feels as though Merkel has co-opted the center-left and its agenda. Some within the SPD want the party to distance itself from the chancellor and strengthen its own identity.
In September, Merkel's announcement that her government would welcome all asylum seekers from Syria marked a turning point in German politics. For the first time in nearly a decade, German voters felt as if Merkel had lost control of the country's situation. Though Berlin tried to backtrack quickly, toughening its policies toward migrants in response to mounting social and political pressure, it did not move fast enough to ease its people's concerns. Instead, the government's stricter stance on migration created deep rifts among the members of the ruling coalition. Merkel attempted to solve the problem by striking a deal with Turkey, but the plan has garnered criticism from across the political spectrum for making too many concessions to Ankara.
Today, the cracks within Germany's political landscape are deepening as the mainstream centrist parties lose support to rivals on their right and left. The chancellor's CDU is still the country's most popular party, but some of its constituents have shifted their loyalty to the right-wing Alternative for Germany (AfD), a party critical of Islam that has called for the eurozone to expel its southern members. At the same time, Germans' approval of the SPD has reached an all-time low, while progressive parties such as the Green Party and The Left are on the rise. The situation has fueled debates within the CDU and SPD as some members question whether their parties should move to the right and left, respectively, in an effort to better compete with their challengers. If the CDU and SPD do not perform well in the approaching elections, they may be forced to renew their coalition to remain in power. Such an outcome would produce a moderate government in the short term but would solidify the roles of the far-right and far-left as valid members of the opposition, in the long run, improving their chances for success in future elections.
European Indecision and Tension Worsen
As the campaign season unfolds in the coming months, it will influence Germany's and France's behavior, in turn affecting the rest of the European Union. For example, France will hold firm in its support for the European Central Bank's expansionary monetary policy, and it will staunchly defend the institution's independence as the French economy continues to benefit from its decisions. The German government will be more critical of the ECB's actions, particularly those that hurt its financial sector. Because the AfD will base its campaign on criticism of Merkel's migration policy and the ECB's programs, Berlin will be pressured into becoming more vocal about its concerns regarding the ECB.
As elections approach, France will also likely ramp up public spending to appease voters who are dissatisfied with the country's labor reform. Paris will probably side with countries such as Italy and Spain in lobbying the European Commission for more flexibility in enforcing the bloc's deficit and debt requirements as well. France's backing will come not a moment too soon; Italy and Spain are facing renewed political uncertainty themselves. Spanish general elections will be held on June 26, and Spanish parties will once again scramble to form a coalition capable of governing. To the east, Italian Prime Minister Matteo Renzi has staked his political future on a referendum on constitutional reforms that will be held in October. The combination of heightened spending and unstable governments across the eurozone could weaken the bloc's already timid economic recovery and revive doubts about the health of the Mediterranean economies.
It is possible that a significant external event, such as a decision by British voters to leave the European Union, would realign German and French interests. But even then, it would only be temporary. At first, a Brexit would create panic in Berlin and Paris, and a slew of proposals to increase European integration would follow shortly thereafter. Once the initial shock subsided, however, Germany's and France's different views on what Europe's future should look like would once again keep them from reaching any substantive agreements.
Read also How Referenda Threaten the EU
As a result, the European Union is unlikely to introduce any significant institutional reforms before the French and German elections take place. In recent months, officials from both countries have put forth ideas for tightening the bonds holding the bloc together, including suggesting the appointment of a special eurozone finance minister and the creation of a European army. Yet France and Germany have very different visions of how these goals should be achieved, and the electoral interests of leaders in Paris and Berlin will prevent the two from making any headway on such issues.
After the two countries hold their elections in 2017, agreement on institutional reform in Europe will probably become less likely, especially if either country elects a more Euroskeptic government. Neither the National Front nor AfD will rise to power in 2017, but their growing popularity will make their mainstream rivals more wary of Continental integration. It will be more difficult for the European Union to achieve a united front than it already is, whether in regard to the Continent's migration crisis, its relationship with Russia or other challenges abroad. The lack of cohesive leadership, in turn, will widen the divide between Europe's southern countries, which are pushing for more financial transfers and risk-sharing among eurozone members, and their northern peers, which insist on centralizing fiscal powers and limiting their southern neighbors' ability to spend and borrow. Witnessing the European Union's breakdown, Eastern European countries will continue to support the bloc but resist any reforms that increase Brussels' influence over their domestic affairs.
As France and Germany move further apart in their respective views on Continental integration, both will start to question their roles in Europe. France's reluctance to enact reforms will frustrate Germany to no end while Berlin's push for centralized fiscal oversight will irritate Paris, making dialogue more challenging and solutions less likely. In time, both governments' commitment to keeping the European Union together could weaken, particularly if younger French and German generations' skepticism of the bloc persists.
"Campaign Calculations Bring the EU to a Halt" is republished with permission of Stratfor.
