Analysis. The whole future of the EU will play out during the next chapter of EU governance, from the post-COVID rebuilding, the development of the Green New Deal and European sovereignty.

Germany takes the EU Council presidency, setting post-COVID priorities

As of Wednesday, Germany holds the six-monthly presidency of the EU Council, a rotating role which, most importantly, gives the country holding it the power to set the agenda, i.e. the priorities of the EU and the speed with which they are addressed, as well as a subtle power to seek compromise.

But the EU is going through such a difficult period, due to the shocks of COVID and its economic consequences, with the GDP at minus 8% and job losses, that enormous expectations have been built up about the next six months and the role of Chancellor Angela Merkel, who is leading her second six-monthly EU presidency (the first had been in 2007, two years after the French and Dutch double “no” to the Constitutional Treaty which was supposed to be the way out of the Lisbon Treaty).

Merkel will make her debut next week in front of the European Parliament, in a plenary session in Brussels. The first deadline will be the appointment of the head of the Eurogroup on July 9, to replace the Portuguese Mario Centeno: Germany supports the candidature of the Spaniard Nadia Calviño, who, if she succeeds in beating the Irish Paschal Donohoe and the Luxembourger Pierre Gramegna, will be the first woman to take this post.

Then, the first important date will be the meeting of the European Council on July 17-18, where Germany hopes to be able to conclude the approval of the recovery plan worth €750 billion, by convincing the four “frugals” (the Netherlands, Denmark, Austria and Sweden, to which one can add Finland as well), after having convinced its own citizens (63% are in favor). The Recovery Fund was presented by the Commission on May 27, starting with Merkel and Macron’s draft on May 18, where Germany marked a major turn in favor of debt mutualization and financial transfers.

In a symbolically charged coincidence, the Conference on the Future of Europe will begin during the German semester and will end during the time of the French EU Presidency (the first semester of 2022). The whole future of the EU will play out during this chapter, including its industrial future, with the reconciliation of the economy with the environment, the development of the Green New Deal, the future of young people and European sovereignty in the broad sense.

In October, a European climate summit is planned, with a view to a climate law by December: Germany has so far held back on a carbon tax at the EU borders, but now Merkel says this is an instrument that “can be developed,” but “it won’t be easy.” Germany hopes to be the point of balance, both between North and South (thanks to the agreement with France) and East and West—although relations with the East risk turning explosive, and not only on the issue of ecology: the first EU Report on the rule of law will come out in September, after the drifts of Hungary and Poland that are making Merkel concerned. The link between respect for the rule of law and the reception of EU funds will have to be addressed.

The Council starting on July 17 will also discuss the multi-year 2021-27 budget of the EU, the debate on which was blocked in March. At a total size of around €1.1 trillion, there are tensions about decimals and the issue of the rebate, i.e. the reimbursement for some net contributor countries (concerning the redistribution of the British rebate, which is at the origin of the problem), including Germany itself (as well as the Netherlands, Austria and Sweden). Brexit is another major challenge for the next six months. The UK will definitively leave the EU on Dec. 31. Negotiations are at a standstill on fishing, trade, the role of the European Court of Justice and a “passport” for financial services for the City of London.

Merkel remains confident, however, and believes that by the end of October there will be a final text, in time for ratification by the European Parliament and the EU countries as well as London, to avoid falling off the cliff at the end of the year.

As regards foreign policy, the agenda includes the sensitive subjects of relations with the US (particularly on European defense) and China. The EU-China summit, cancelled because of COVID, could be held by the end of the year: the EU is now more circumspect with Beijing regarding economic relations, but weak on the issue of Hong Kong. The German chancellor, who paid a price for her ambitious “wir schaffen das” (“we can handle it”) in 2015, will again have to deal with the issue of migrants, which she will now consider with a more technocratic perspective.

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