Year XXXVII, Number 3, November 2024

Junius
Officer of the European Central Bank 

Recently, the protracted phase of domestic political controversy has made Emmanuel Macron and Olaf Scholz look like lame ducks, raising real questions about the health of democracy in their countries. On the contrary, European democracy is thriving, after the re-election of Ursula von der Leyen in Strasbourg on July 18. She is the real winner of the elections to the European Parliament on 9 June and has a chance to transform the European Commission into a true government of the European Union.

After a devastating result at the European elections, the German government coalition also suffered defeats in Saxony and Thuringia, where voters rewarded far right - and far left-wing anti-system parties: Alternative für Deutschland (AfD) and Bund Sarah Wagenknecht (BSW), respectively. The sum of their votes makes it impossible to ignore them in future local coalitions. In the meantime, disagreement among coalition parties has been unprecedented. It is highly unlikely that the current ‘traffic light’ coalition will win a new mandate to govern at the forthcoming federal elections early autumn 2025. More generally, the tone of political exchanges among political forces has become rowdy due to the radicalisation of significant proportions of public opinion and, more broadly, the general sense of frustration over the quality of government. The attempt by governments and coalitions to find agreement on key issues, like migration and industry, has failed.  

At the same time, President Macron faced the Herculean task of getting a majority for a new government, after the snap national elections (which he imprudently called after his defeat at the European elections) resulted in a completely split chamber. While a new coalition of left parties (New Popular Front) managed to achieve the best result in terms of votes, Macron deemed them unable to secure a larger majority and assigned the task of setting up a government to the centrist Michel Barnier, after a long phase of uncertainty where several possible candidates were considered and dismissed because of reciprocal vetoes between parties. Macron chose Barnier after being assured of the non-opposition of the far-right Rassemblement National. Such an (albeit indirect) involvement by the far right in government is a major change in French politics although no longer in Europe.

Around the same time, Mario Draghi presented to Council and Parliament his report on “The future of European competitiveness.” Ever since, there has been endless talk of epoch-making decisions if the European Union is to survive as an independent force. Hopefully, the report will be the policy basis for the political appointments of the new commissioners which Ursula von der Leyen will make next week. This doesn't mean everything will be plain sailing. Quite the reverse, the political nature of the new Commission means that the EPP, SDR and Greens will continuously measure their relative power, and some wrangling has already started. European parties will need to prove that they can live up to expectations. If they keep the bar high, the Commission will have room to set the scene for initiating key European reforms. Given the weakness of national governments, Von der Leyen can de facto behave as the head of government of Europe.

These developments suggest that the phase in which the European Union derived its strength from France and Germany is coming to a close. We have now started a new phase in which the European Union will not be able to survive without a fully-fledged federal government and political system of its own. France and Germany will only be able to avoid further collapse as part of a federal European government which delivers common goods and services to its citizens. Without this there can be no political stability in these countries and they risk returning to the weakness of the Fourth and Weimar Republic respectively.

The crisis of France and Germany

The crises of France and Germany stem from the political failure of two projects that were in themselves reasonable and necessary. It is precisely the original rationality of the policies swept away by recent events that aggravates the current situation.

In France, Macron came to power in 2017 with the idea of reforming a country unable to achieve the necessary social and political consensus to reform itself, partly because of the face-off between Gaullism and socialism, as in the 1970s. Macron deftly exploited the weakness of the traditional parties and won the presidency, emerging as the young and modern leader of a new liberal political force. In hindsight, the focus on himself and the incapacity to broaden consensus beyond the urban, affluent and inclusive electorate were his downfall.

In addition, Macron failed to get sufficient support from Chancellors Merkel and Scholz when he pleaded for the establishment of a European fiscal capacity in his two famous speeches at the Sorbonne. In the absence of a shared, supportive European economic policy, the costs of modernizing the French economic and social system soon became apparent. Important layers of French society turned against Macron during his first term, for example when the Gilets Jaunes started protesting in 2018 against ecological taxation. The second presidential term failed to live up to Macron's hopes even more, as he immediately lost his absolute majority in the National Assembly within weeks of re-election. The unfavourable results of the European and national elections have created a situation of radical uncertainty: will Prime Minister Barnier manage to govern France during the one-year period during which the National Assembly cannot be dissolved for new elections? Meanwhile, the economy is deteriorating and economic radicalisation has reared its head once more, with increased severity. To put it plain, Macron has failed.

The German fiasco is similarly the failure of a political project. The new 'traffic-light' government of Olaf Scholz, elected at the very end of 2021, sought to end 14 years of Merkel's control on power and – in many respects – policy inaction. Social Democrats, Greens and Liberals joined forces to give Germany a technological boost, such that the country’s manufacturing would lead the way in climate-conscious innovation and the green transition. The intention was to help save the planet while enhancing Germany’s economic strength: an extraordinary export capacity that made its trade surplus (second only to China in GDP terms) an enormous economic powerhouse for society.

None of this materialized. Instead, Germany's manufacturing is in crisis, partly due to adverse external factors (Putin's attack on Ukraine; the trade war between China and the United States). The public sector, ensnared in very strict constitutional rules mandating a balanced budget introduced in the Grundgesetz since 2009, has also failed to make up for the weakness of private investment. Over the past months, German citizens have witnessed with astonishment the exacerbation of two adverse developments. First, instead of an ecologically driven boom, growth has tapered off, the cost of living has exploded, and unions have imposed massive wage increases which have further reduced competitiveness and exports. The economic system has gone into a tailspin and a gloomy pessimism has spread. Second, the efficiency of public facilities has collapsed due to the chronic lack of investment: public transportation does not work, the quality of hospitals and schools has deteriorated, the public administration still works with fax machines at a time of Artificial Intelligence. Germany has discovered it is grossly inefficient and backward. The emigration of skilled labour has intensified, the illegal immigration of an uneducated workforce is seen as a threat to economic, social, and political stability.

Copernican revolution

In France, the recent developments have weakened democracy, raising the question of how Macron’s new government can have emerged from such an election result. In Germany, politicians with a clear neo-Nazi orientation such as Björn Höcke have won local elections. Today the only stable governing coalition is the one that elected Ursula von der Leyen to the European Parliament on July 18.

This is a Copernican revolution. Political competence is moving from Member States to Europe. Of paramount importance is the understanding that adversity can better be faced by a united Europe than by countries acting alone.

Obviously, no political endeavour is free from tensions nowadays and the new Parliamentary term will be eventful and probably dramatic. But Ursula von der Leyen has a real chance to accomplish two tasks. First, to show Europeans that we can have a common future even in a world so hostile to us (from climatic to geopolitical conditions). Second, to prove to the French and Germans that democracy still works.