The risks of Merz’s ‘nein policy’

Brussels. António Costa, President of the European Council, will today face the most difficult leg of his ‘tour of capitals’ as he seeks to reach an agreement on the new Multiannual Financial Framework, which sets out the European Union’s resources for the period 2028–34. Costa will be in Berlin to meet Friedrich Merz, at a time when the German Chancellor is facing his first serious political crisis due to the triumph of Alternative for Germany (AfD) and the defeat of his CDU in the Saxony-Anhalt elections. “A weakened Chancellor in Berlin is a paralysed Chancellor in Brussels,” a European diplomat explains to Il Foglio. The election results in a small eastern German state with just over two million inhabitants could have a significant impact on the EU. Diplomats and officials fear that Merz and his government, already very cautious about the priorities for reviving Europe, may become even more hesitant, even hostile, to the point of falling into inaction. Merz’s instinctive reaction to contain the far right could be to attack the EU. Or to use it as a scapegoat for Germany’s problems. Given his recent past, but also his more distant history, no one believes that Merz will seek salvation in the pro-European spirit. The EU’s 2028–34 budget could be the first casualty. The Chancellor is demanding cuts of 400 billion euros compared with the Commission’s proposal of 1,800 billion for seven years.

Costa’s mission in Berlin regarding the EU’s 2028–34 budget appears almost impossible. The President of the European Council wants to reach an agreement by the end of the year to prevent EU funding from becoming an issue in the election campaigns in France, Italy, Poland and Spain. Unanimity is required. Costa has already met with around ten heads of government. This week, he will meet with leaders from the ‘frugal’ countries for the first time. The President of the European Council has so far been very cautious. He has avoided mentioning shared debt. He has insisted on the need for new own resources (taxes to finance the EU budget) in order to reduce national contributions. The aim is to fund new priorities such as defence and competitiveness, whilst safeguarding traditional policies such as agriculture and cohesion. But even before the elections in Saxony-Anhalt, Merz had shown himself to be unyielding on several points. He brought together the leaders of Sweden, Finland, Denmark, the Netherlands and Austria in Berlin, from whom he demanded a cut of “several hundred billion euros”. With a budget of 1,800 billion for 2028–34, Germany’s contribution to the EU would rise to well over 50 billion euros a year. A “nein” to spare Germans from having to dig into their pockets may be an easy way to try to win back the electorate. But it would condemn the EU to a budget of just one per cent of GDP, well below what is needed to realise its ambitions. The “politics of nein” could extend to other key EU priorities.

The Merz government has resisted the completion of the capital markets union, in particular the single supervision of financial operators. Following the tentative overtures of recent months within the G6 – comprising Germany, France, Italy, Spain, Poland and the Netherlands – Berlin may once again oppose the move. Of the recommendations in Mario Draghi’s report, Merz has fully endorsed only the simplification measures. The idea of a more flexible state aid framework, centred on European public goods, is opposed by Germany, which wishes to focus on domestic enterprises. Germany’s rearmament plan, too, is conceived in essentially national terms, reawakening fears and resentments. “We want Germany, under democratic leadership and as Europe’s leading economy, to play an important role in ensuring our common security. But we are all too aware of where a rearmed Germany in the hands of a pro-Russian far-right party could lead – and that is exactly what the AfD represents,” said Polish Foreign Minister Radoslaw Sikorski. French Defence Minister Catherine Vautrin accused Berlin of “stabbing Europe in the back”, by scuppering Franco-German plans for a sixth-generation fighter jet or favouring the Americans for the missile defence shield. Ursula von der Leyen’s Commission does not dare to stand up to Germany. But it fears that the EU could become Merz’s favourite target as he seeks to regain support at home.