A Corona Presidency in the Coronavirus Crisis?

Priority 1: Corona, its consequences – and the EU budget

The most important task will be to facilitate agreement on the EU’s response to the pan­demic and its multiple consequences. As Germany prepares to begin the presidency, the number of infections in EU states has fallen and restrictions on public life are gradually being lifted in the majority of states. However, the pace of relaxation, the reopening of borders, and infection rates will vary among member states. Even with­out a second wave of infections, substantial energy and attention will be required for coordinating national and European-level measures as far as possible.

At the same time, centrifugal forces have to be contained. The corona pandemic is a symmetrical shock with asymmetrical effects: It will hit southern EU states harder economically than northern and central/ east­ern European states. Even Greece, which has managed to keep infection rates relatively low, is likely to suffer heavily due to the economic importance of its tourism sector. In addition, the leeway for budget­ary stimuli differs widely among member states. Countries such as Germany have been able to launch extensive economic stimulus packages. Such disparities could also endanger the level playing field of the internal market.

In response to the disparities, France and Germany have proposed an EU recovery fund, which the EU Commission has now included in its proposal for the Multiannual Financial Framework (MFF) 2021–2027 – with €500 billion in grants and €250 billion in loans. Although EU member states agree in principle that such a recovery fund is necessary, key issues such as the volume of the fund, the ratio of grants and loans, and control of the use of funds are to be nego­tiated during the German presidency. If member states reach agreement on the basic elements of the recovery fund, it would entail a significant deepening of Euro­pean integration.

Closely linked to this is the finalising of the MFF – the EU’s regular seven-year budg­et – for the period 2021–2027. Even under normal circumstances, MFF negotiations are among the most difficult in the EU: Member states have to decide unanimously about financial allocations, and thus political priorities, while also negotiat­ing which states are to benefit most from the EU budget and which are to contribute the most as net contributors. In this regard, too, close coordination with EU institutions is necessary – the proposal for the MFF is presented by the Commission, and the delicate negotiations between the member states are conducted at the highest level in the European Council and chaired by Coun­cil President Michel. The German presidency will be primarily responsible for facili­tating a compromise within the European Council and for reaching an agreement with the European Parliament.

This will require a great deal of coordination, and the stakes are high: The success or failure of the German presidency will be largely determined by the outcome of the negotiations on the MFF and the recovery fund.

Priority 2: Brexit and other time-critical dossiers

Second-order priorities are those processes that need to be completed by the end of 2020 due to legal deadlines – despite logis­tical constraints caused by the pandemic. These include not only the MFF, which must be adopted early in the second half of 2020 so that EU funds can be disbursed at the beginning of 2021, but also, for example, the annual fishing quotas and the regular 2021 budget.

A significant legal deadline is 31 December 2020, which is the end of the Brexit tran­sition period, after which the UK will no longer apply EU law, thus leaving the EU single market and Customs Union and ceasing to participate in all other EU poli­cies. By then, the agreement(s) on the future relationship between the EU and the UK should be in force, otherwise there is a risk of a “no trade deal” Brexit, including the reintroduction of border controls and cus­toms duties. It is not only because of the pandemic that talks have gone nowhere so far, pointing towards another conflict-laden autumn with tough EU-UK negotiations.

On Brexit, the German presidency has only a limited role to play – the negotiations are conducted by the EU Commission, coordination among the EU-27 is delegated to a separate working group in the Council under permanent leadership, and the rele­vant body at the political level is the Euro­pean Council. Thus, separate initiatives by the German presidency or bilateral German-British negotiations on Brexit would be counterproductive. In practice, the presi­dency’s role will be to support EU negotiators and preserve the unity of the EU-27, though Brexit is likely to dominate Euro­pean politics again in the autumn.

Priority 3: Any other business

Containing the pandemic and reaching an agreement on a recovery fund, as well as MFF and Brexit negotiations, present for­mi­dable challenges in themselves. In addition, legislative dossiers not finalised during the Croatian presidency will have to be taken up again, and the Council’s work will con­tinue to be logistically limited due to the pandemic. There will thus be only limited time and political attention left for any­thing other than obligatory projects.

Politically, Berlin’s presidency comes at the beginning of the von der Leyen Com­mission. Thus, the presidency would be called upon to take forward the first major initiatives of the new Commission, both in the European Council and in the trialogues with the European Parliament and the Com­mission. Key projects are, for example, legislative initiatives on the European Green Deal, EU regulation on artificial in­tel­ligence, the expansion of the digital inter­nal market, and the draft law to com­bat tax evasion in Europe.

The Green Deal is a case in point on the pandemic’s impact on other issues. Al­though still part of the presidency’s agenda, the debate on the Green Deal now focuses on the importance that climate policy should be accorded in the recovery programmes. In view of the immense economic damage caused by the pandemic, critics are warning against imposing further restrictions on European industry at present. Proponents argue that climate protection cannot wait, and that the recovery fund should be used to drive the transformation of the European economy towards climate neutrality. This will put Germany’s negotiating skills to the test, in particular because the Just Transi­tion Fund for member states that are more affected by the energy transformation might be lower than envisaged before the pan­demic struck. However, as Europe’s indus­trial powerhouse, Germany has particular powers of persuasion that it can deploy to push for the Green Deal.

The protection of democracy and the rule of law will be sensitive issues for the Ger­man presidency in two respects. On the one hand, the Commission intends to make proposals on how to strengthen the rule of law in member states. For another, the next report on the state of the rule of law is due in the second half of 2020. A focus will be on Poland and Hungary, against which pro­ceedings for breaches of the rule of law are underway. The situation has worsened due to the pandemic, as some EU member states have decided to restrict fundamental rights and public life in order to contain the spread of the coronavirus. Such measures have to be rescinded once the acute phase of the pandemic is over. The challenge facing the German presidency will be to com­bine the protection of the fundamental rule of law principle with the negotiations on the next budget and the recovery fund. In addition, the conclusion of a new “pact for asylum and migration” is an ambition of Berlin. However, it is unlikely to come to fruition during Germany’s presidency because member states remain deadlocked, especially on the question of the distribu­tion of refugees (see SWP Comment 28/2020).

The pandemic has also affected the presi­dency’s foreign policy agenda. Prior to the outbreak, the German government had set its sights on EU relations with China as a major topic. Meanwhile, the associated sum­mit has been postponed until an un­specified date. A summit meeting between the EU and the African Union is still sched­uled to take place. The second half of 2020 will also see presidential elections in the US, after which EU member states will have to decide on what to make of the outcome and how to deal with the winner – a politi­cally sensitive issue regardless of who wins. In addition, there are likely to be unexpect­ed events and challenges in the EU’s southern neighbourhood and beyond that demand an EU response. Thus, the presidency would be well advised to strongly support the efforts of the EU High Representative of the Union for Foreign Affairs and Security Policy, Josep Borrell.

Exercising co-leadership – also beyond the presidency

The German presidency can only succeed in this if it can broker compromises between its EU partners. But in view of the devastating effects of the pandemic, more can and will be expected of Germany as an EU heavyweight than just forging compromises and working through a predetermined agenda. Still, the presidency cannot be the sole driv­ing force providing strong leadership in Europe. Instead, it must work together with newly elected EU leaders still working to consolidate their political authority. It would be of little help to the future development of the EU if Germany were to reinforce the role of the presidency at the expense of the institutional leadership of the European Council president, the Commission presi­dent, and/or the High Representative. Ger­many’s leadership responsibility will not end with its Council presidency.

Priority must be given to crisis containment, to mitigating the immediate effects of the pandemic, bearing in mind that – without a vaccine and effective medication – a second wave of infections could cause even greater damage. Yet, it is equally im­portant not to get lost in crisis management. For therein lies the greatest opportunity and challenge: to heed the lessons of the pandemic and use them to revitalise a crisis-ridden EU.

In this regard, the corona crisis has opened a window of opportunity as it potently demonstrates the unique added value that member states gain from Euro­pean unification. In combating pandemics, a “prevention paradox” can be observed: Strict hygiene measures and restrictions concerning contact and mobility ensure containment, but their very success appears to undermine the rationale, and thus tends to render people more inclined to disregard cumbersome restrictions. The EU sometimes suffers from a similar “success trap”: If everyone assumes that the Union is fail-safe, they can reduce their willingness to exercise national solidarity for the Euro­pean common good.

This was evident at the beginning of the pandemic, when national reflexes prevailed and borders were closed in an uncoordinated manner. However, the crisis quickly taught member states that going it alone is not a viable option, meaning that only a collec­tive European response was the way out. Unprecedented rescue and recovery pro­grammes were mobilised both nationally and at the European level. Germany, too, initially alienated partners by imposing export restrictions, but then quickly show­ed practical solidarity (e.g. by sup­plying medi­cal goods, admitting Covid-19 patients to German hospitals, and lifting said restric­tions).

One of the main tasks of the German presidency will be to ensure that solidarity and a joint economic recovery programme are achieved quickly. However, it is not only the result that counts, but also how an agreement is reached. For the fund is unique not only because of its size, but also because it is based on the collective as­sump­tion of debt, which will be repaid in the long term from EU own resources. This would be a significant step towards fiscal integration, which the member states have so far been unwilling to take.

What is more, the integrative push resulting from the pandemic crisis might also facilitate “package solutions”. A dead­lock on individual issues can sometimes be overcome if these issues become part of a larger package: Achieving a compromise can be made easier if more items are on offer that enable cross-issue deals. Such a “grand package” deal could consist of the recovery fund, the MFF, the Green Deal’s Just Transition Fund, the rule of law, and migration issues.

Seize the opportunity

Secondly, Germany and Europe could make up for a previously missed opportunity. Between the French and German elections in 2017 and the European elections in 2019, there was an opportunity to enact more far-reaching EU reforms. It was not seized upon – partly because Berlin remained too passive during this period.

In addition to the joint fight against – and recovery from – the pandemic, two other factors now favour European inte­gration. The first is the May 2020 ruling of the German Constitutional Court on the bond purchase programme of the European Central Bank (ECB). Its central message is that the ECB must not overstep its authority if it does not want to come into conflict with the German constitution. The ruling should encourage the German government to press ahead with the structural reform of the Eurozone in order to provide relief for the ECB and make the member states more accountable to each other. In the end this, would entail fewer ECB interventions and more fiscal union.

Another integrative factor is the US. Under President Trump, transatlantic rela­tions have deteriorated and will hardly improve if he is re-elected. But even under a President Joe Biden, there will be no going back to the time before Trump due to the country’s fragmentation, its demographic change, the devastations wrought by the pandemic, and the wounds Trump will leave behind. The US will demand more burden-sharing and ownership from Europe, which coincides with Europe’s interest in a more balanced transatlantic partnership. In addition, the US-China rivalry – Trump or no Trump – will not vanish, not least because of the high-handedness of the auto­cratic Chinese leadership. Only a united Europe can prevent its member states from becoming pawns in the games of global powers.

The corona pandemic, Brexit, the ECB ruling of the Constitutional Court, a bal­anced transatlantic partnership, Europe’s self-assertion in the US-Chinese rivalry, and vis-à-vis an expansive China – they are all integration-promoting circumstances and factors that could advance a successful Ger­man presidency. The planned launch of the Conference on the Future of Europe can also provide a long-term impetus for the progressive development of the EU.

Promoting European solidarity and autonomy

It is easier to enhance Europe’s popularity and exercise political leadership if one has a guiding idea of what Europe stands for and how it should deliver for the benefit of its citizens. Such an idea could be an autono­mous Europe that relies on mutual solidarity. Solidarity is a comprehensive principle based on reciprocity: Reciprocal political solidarity means that it can be ex­pected when everyone does their national share for the common European good. Tangible solidarity implies more than fi­nan­cial support for those who have suffered most from the pandemic; at its core it is about being loyal to the Union, that is, ad­hering to the values, rules, and objectives as laid down in EU treaties. This includes respecting the EU as a community of democracy and rule of law. Furthermore, solidarity has an external dimension: a Europe that acts as a fair and generous partner to others.

Autonomy does not mean self-suffi­ciency, which is neither attainable nor desir­able (see SWP Research Paper 4/2019). An autonomous Europe is a Europe whose collective power puts its member states on an equal footing with third parties, be they states or non-governmental actors such as America’s Google and Amazon or Chinese companies such as Baidu and Alibaba. The pandemic has revealed how fragile supply chains and how harmful excessive depend­encies can be. A long-term challenge trans­cending the German presidency will be to make Europe more autonomous through measured de-globalisation, not only with regard to medicines and protective clothing, but also with regard to digital infrastructure, energy, and key technologies. Such a Europe can and must act as a self-deter­mined regional and global player. Only an autonomous Europe can enter into symmetrical interdependencies of its own choos­ing. Championing an autonomous Europe based on solidarity is worth all the efforts of the German presidency.