German Chancellor Angela Merkel (CDU) is about to leave politics.
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LONDON – As Germany prepares to change its political stance, analysts are looking at the impact the next government could have on the European Union.
Europe’s largest economy began voting in a crucial vote on Sunday to elect a new chancellor after Angela Merkel’s 16 years in power.
The Socialist Party, SPD, won the election with 25.7% support, according to preliminary results. It is now trying to form a coalition government with the Green Party and the liberal FDP. Merkel’s conservative coalition, the Christian Democratic Union, and the Christian Social Union, which has dominated German politics for decades, suffered its worst election results since World War II, garnering 24.1% of the vote.
The SPD’s chancellor candidate, Olaf Schulz, the country’s current finance minister and vice-chancellor, now appears poised to become Germany’s next leader. Although this is not a completed agreement and tough alliance talks may ultimately fail.
“If Olaf Schulz becomes chancellor, he will be in a much better position, because he has at least the experience of a finance minister,” Daniela Schwarzer, executive director of the Open Society Foundation, told CNBC on Monday about Schulz’s relationship with Europe.
Nonetheless, Schwarzenegger raised the flag that Schultz is much less experienced than Merkel, who has played a fundamental role in European politics for decades.
“We’ll see a few months in particular – even after the French election next spring – where things may be less smooth than usual,” he added.
As one of the founding members of the EU, Germany has long held a certain weight in European policy-making. During her tenure as Chancellor, Merkel helped lead the bloc’s response to the global financial crisis, the sovereign debt crisis, the immigration crisis, and most recently the coronavirus epidemic.
Outside of leadership style, there are open questions about what the new German chancellor will mean for deep integration into the 19-euro economy.
“While mood music is going to be a bit more positive about what the EU wants, I think the German chancellor’s ability to act decisively – it’s going to be quite limited,” Robin Beu, managing director of the Economist Intelligence Unit, told CNBC’s Squawk Box Europe on Monday. .
This is because, once formed, the alliance is likely to lean more towards EU integration than in the past. However, he stressed that the tripartite alliance would be more difficult to manage, in terms of broad views.
“I don’t think you’ll see particularly strong leadership,” Beau added.
The next German government in Europe will have to face many problems.
One of the major projects at the euro zone level is being carried out by the so-called Banking Union যা which transfers power from the National Banking Authority to a wider European institution. It was introduced slowly in the wake of the Slowly Crisis, but Germany was particularly adamant about this idea. Many Germans oppose the plan, fearing they may be forced to pay heavier bills to support less financially conservative eurozone countries.
A view of the EU and German flags on the Reichstag building, the seat of the German parliament.
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The euro zone is also due to update its debt and financial rules in 2022 – this is because the rules have been broken at different times, for example, different countries have reported debt ratio above 60% of GDP and deviations are expected to continue.
It is unknown at this time what he will do after leaving the post.
Also, the EU decided in July 2020 to jointly raise funds from the public market to fund the recovery of the region from the epidemic. The so-called recovery fund was introduced as a single measure to appease financially conservative countries such as the Netherlands, but some experts wonder if the EU can make it a permanent tool কিছু something that even the new German Chancellor needs to support.
Scholes of the SPD argued that Europe’s financial rules were already flexible enough to allow countries to spend more in times of epidemic damage. He avoided questions about raising the EU debt again in the future, saying it was not a debate at the table.
Meanwhile, the FDP, which is likely to feature the next German alliance “Euroseptic has changed in terms of consolidating the euro zone,” analysts at consulting firm Eurasia said in a note on Monday.
“Germany’s position on EU debt and monetary policy is unlikely to soften dramatically, so recovery funds are becoming a permanent feature of the EU’s financial architecture.”
Another European issue is the ambitious goal of becoming carbon neutral by 2050. To achieve this, European lawmakers are discussing a concrete plan to reduce greenhouse gas emissions by at least 55% by 2030. Germany, along with its prominent auto sector, will play an important role in fulfilling the green aspirations.
Eurasia described SPD’s Schulz as a realist on the front, saying he would be “open to using the Regal Room to finance Germany’s transition to Net-Zero.”
David Sasoli, president of the European Parliament, is one of the few politicians in Europe to comment on the outcome of the vote. After congratulating Schulz on his victory, he said: “After this historic crisis, there is no time to lose: Europe needs a strong and reliable partner in Berlin to continue our normal work for social and green recovery.”