Angela Merkel faces final challenge at EU summit

Angela Merkel heads to an EU summit this week that could end up defining her legacy, just nine months before she quits the political stage, and Germany and Europe embark on the post-Merkel era.

It is the last summit of Germany’s six-month presidency of the EU, a time of unprecedented challenges for the 27-member bloc. The coronavirus pandemic plunged it into the worst economic crisis in its history, talks on Brexit have gone to the wire and a row over the rule of law has caused a damaging split between Hungary and Poland and the bloc’s 25 other member states.

That dispute threatens one of the EU’s singular achievements — a €1.8tn deal on its next seven-year budget and a massive Covid-19 recovery fund, financed by debt raised on capital markets by the European Commission and designed to help struggling economies rebound from the crisis.

“This was to be the main legacy of the German presidency and, perhaps, the pinnacle of Merkel’s time as chancellor — and now it’s hanging by a thread,” said Jana Puglierin, head of the Berlin office of the European Council on Foreign Relations.

Hungary and Poland’s objections centre on a key provision tying the release of EU funds to adherence to the rule of law. Their response — threatening a veto over the whole budget deal — threw down the gauntlet to all the other member states. But for Ms Merkel it was particularly painful — a rejection of everything she stands for.

“Merkel is all about patiently, doggedly searching for compromises,” said Josef Janning of the German Council on Foreign Relations. “But you can’t do that when a member state threatens a veto. That just pulled the rug from under her feet.”

The shockwaves from a potential veto would be far-reaching. Leaders had been hoping to use this week’s summit to land a major agreement on the EU’s emissions targets, with member states pencilling in a 55 per cent reduction by 2030. But those plans hinge on the availability of funds to help pay for the transition to a lower-carbon future. So without a deal on the budget — known as the MFF or multiannual financial framework — and the recovery fund, diplomats warn, the climate discussion is likely to be derailed.

“Not agreeing on the MFF . . . endangers reaching the very, very urgent and necessary conclusions on climate,” said one.

Then there are the ongoing Brexit discussions. If the UK and EU fail to strike an agreement on their future relationship in the next few days, the potential chaos associated with a no-deal outcome could spill over into the summit as well.

Officials have been working behind the scenes to tee up a compromise between the two sides in the rule-of-law dispute. This would add some reassuring language aimed at easing concerns in Poland and Hungary that they would be unfairly targeted by the rule-of-law mechanism.

But the commission has at the same time been working on fallback options that would allow the 25 member states backing the mechanism to set up the recovery fund by themselves, cutting Poland and Hungary out.

That, however, goes against everything Ms Merkel believes in. Her mantra has always been to “keep everyone onboard”, as her officials put it, and to keep negotiating until a solution acceptable to everyone begins to emerge. The idea of a new EU instrument from which certain EU members are excluded is deeply inimical to her.

Some say she has not much choice. “Merkel now just has to stand up to [Hungarian prime minister Viktor] Orban and [leader of Poland’s Law and Justice party Jarosław] Kaczyński,” said Ms Puglierin. “If she doesn’t, she will just damage her credibility.”

Opposition MPs argue she should have stood up to them long ago. “When you compromise for too long with populists, they push you so far that by the end of it you’re right up against the wall,” said Franziska Brantner, Europe spokeswoman for the German Greens.

Hungarian prime minister Viktor Orban, right, and his Polish counterpart Mateusz Morawiecki hold a press conference after meeting in Budapest last month © Andrzej Lange/EPA/Shutterstock

The German presidency of the EU was not supposed to end with such a crashing row. There were high hopes that Ms Merkel’s deft stewardship would put the EU firmly on the path to recovery. 

Some think that was always unrealistic. “Expectations were a little overloaded,” said Manfred Weber, head of the centre-right European People’s party group in the European parliament. “Everyone said — here comes Merkel, she’ll solve all Europe’s problems. But it was clear from the start that would be hard to achieve.”

Ms Merkel herself had big ambitions for the presidency. She wanted to launch a discussion on the EU’s future, advance the green and digital agendas, and kickstart stalled talks on reforming the EU migration system.

Yet progress has been halting. Ms Merkel’s hopes that the EU could finally clarify its relations with China “didn’t get very far”, Mr Weber acknowledged, with the pandemic forcing the cancellation of an EU-China summit that had been due to be held in Leipzig in September. The virus, which made it next to impossible for working groups to meet physically, “put an enormous strain” on the German presidency, Mr Weber said.

There are still hopes that compromises can be found. Yet diplomats remain fearful the German presidency could end in failure — on reaching a Brexit trade deal and on getting the recovery fund off the ground. That could badly harm Ms Merkel’s reputation just months before the Bundestag elections that will mark the end of her 16 years in power.

“It would be the proof that her time is over,” said Mr Janning. “It would show that her magic powder just doesn’t work any more.”

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