BREXIT MAY be tearing Britain’s political establishment apart, but the 27 remaining states of the EU have held firm. The European Commission’s red lines—principally the insistence that there can be no deal better than EU membership—have withstood the talks. As The Economist went to press, Theresa May was on her way to the European Council summit to beg for further concessions from EU leaders. They had ruled out any renegotiation of the Brexit deal and suggested only presentational tweaks, just stopping short of offering to repeat it more slowly and with pictures. Though few in Brussels relish the chaos in London and all are heartily sick of the Brexit saga, continental leaders allow themselves a little satisfaction at the competence with which their side has handled matters.
That, however, is to cling to a qualified success amid many failures. When not listening to Mrs May’s pleas, the 27 looked set to stumble through an agenda that reads as a gazetteer of roadblocks: problems where progress is proving glacial but which, if left unresolved, could ultimately fracture the union. All indicate the increasing dysfunction of the Franco-German relationship.
Above all, this was meant to be the summit to fix the euro zone. The election in May 2017 of Emmanuel Macron, a German-friendly French president, fuelled hopes that Angela Merkel and her colleagues might at last work with Paris to fix the common currency’s structural flaws. That would mean completing a common banking union, to break the self-reinforcing link between wobbly sovereigns and wobbly banks, and creating quasi-federal fiscal tools to support struggling economies in downturns. Mr Macron proclaimed his vision last year, but has come off much the worse from his subsequent collision with the German political class. The consolidation of a hawkish “New Hanseatic League” of fellow northern states and the formation of a populist, expansionary government in debt-laden Italy have only buttressed the Teutonic wall into which the French president has crashed.
Leaders will probably approve some modest new powers for the European Stability Mechanism, the EU’s bail-out vehicle, and leave the door open to a tiny euro-zone budget. But they remain split on whether this pot should be used to stabilise stricken economies. And the common insurance of bank deposits, the foundation of a coherent banking union, remains a distant prospect. Mr Macron despairs of Mrs Merkel’s marmoreal intransigence. The president’s announcement on December 10th that he would increase wage subsidies and make overtime tax-free threatens to lift his country’s deficit above the EU’s limit of 3% of GDP. His previous obedience to it had been totemic of his bid to woo the German establishment and thus sell his reform proposals, so the shift suggests a president downgrading or even ditching that fruitless charm offensive. It also hands the Italian government an invitation to escalate its own budgetary battle with the EU institutions.
Also on the agenda in Brussels is migration. Here the EU is edging towards expanded controls on its southern borders. But it lacks robust mechanisms to deal with future movements of people, including ways to share out those with valid claims to asylum in the EU and lighten the burden on Mediterranean states. Lastly, the leaders were due to ponder the EU’s next budget, covering the years 2021 to 2027, where disagreements over regional payments to illiberal member states and old bugbears like the wasteful common agricultural policy (CAP) make a final agreement before 2020 unlikely. Future shocks—the next euro-zone crisis, a new migration surge, a military crisis on Europe’s fringes or a breakdown in east-west relations in the EU—will expose the heavy cost in unity, prosperity and security of the union’s failure to achieve more.
Yet the outlines of a grand bargain are not so hard to discern. It might see defence laggards like Germany contribute more to common security; illiberal governments like that of Poland reinstate democratic norms and co-operate more on migration; northern “Hanseatic” states like the Netherlands tolerate more euro-zone integration and contribute to managing migration flows; debtor states like Italy accept write-downs of risky loans and greater common budgetary oversight; and big farming states like France accept a trimming of farm handouts in return for extra spending on regions, migration management and common defence. With compromises like this, the union could theoretically break its roadblocks and prepare for future crises. Such mega-compacts have helped advance Europe in the past. In the 1960s Germany got industrial integration in return for the CAP. In the 1990s France got the euro in return for German reunification.
The lost leader
That took a lot of persuasion. Yet the sort of political skill that can take voters along as wrenching changes are made seems to be in short supply; and without democratic consent, moves towards greater federalisation are doomed to provoke dangerous backlashes. Angela Merkel is on her way out. Annegret Kramp-Karrenbauer, the new chief of her Christian Democratic Union, is a fellow moderate, but must now heal wounds on the party’s right, leaving her little room for grand European compromises, and unproven abilities when it comes to selling them. Mr Macron is deeply unpopular at home and seems to have given up on substantial German co-operation. A third participant in the Franco-German alliance might help bolster it, but Italy and Poland have turned to nationalist populism and Spain, though willing, remains politically unstable.
Things could change, of course. Perhaps a demob-happy Mrs Merkel, “AKK” at her side, will marshal her residual political capital for a last European push. Perhaps Mr Macron will recover his standing. But it requires a lot of optimism to see it. Today, when the modestly competent negotiation by the EU of a big member’s flounce-out counts as a success, that is in short supply.