What does the German election, Scholz, etc. mean for the EU

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German Chancellor Angela Merkel (CDU) is about to leave politics.

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LONDON-As Germany prepares to overhaul its political status quo, analysts are studying what impact the next government might have on the European Union.

After Angela Merkel (Angela Merkel) ruled for 16 years, Europe’s largest economy voted on Sunday to elect a new prime minister.

According to preliminary results, the Socialist Party (SPD) won the election with a 25.7% approval rate and a narrow margin. It is now trying to form a coalition government with the Green Party and the liberal Liberal DemocratsMerkel’s Christian Democratic League and the Christian Social League’s conservative coalition have dominated German politics for decades, but suffered the worst election results since World War II, with 24.1% of the vote.

SPD Prime Minister Olaf Scholz’s candidate, the country’s current Minister of Finance and Deputy Prime Minister, now appears to be in a leading position and is expected to become the next German leader. Although this has not yet been completed, difficult alliance negotiations may eventually fail.

“If Olaf Schultz becomes prime minister, he will be in a good position because he has at least the experience of a minister of finance,” said Daniela Schwarzer, executive director of the Open Society Foundation, of Schultz and Europe on Monday. Told CNBC about the relationship.

Nevertheless, Schwarzer pointed out that Schultz’s experience is still far inferior to Merkel, who has played an important role in European politics for decades.

She added: “Especially we may see a few months-also considering the upcoming French election next spring-things may not be as smooth as usual.”

As one of the founding countries of the European Union, Germany has long held a certain weight in European decision-making. During her tenure as prime minister, Merkel helped lead the European Union’s response to the global financial crisis, sovereign debt crisis, immigration crisis and the recent coronavirus pandemic.

In addition to the leadership style, there are still unresolved questions about what the new German Chancellor means for deeper integration among the 19 euro zone economies.

“Although emotional music will be more positive about some things the EU wants, I think the German Chancellor’s ability to act decisively-this will be quite limited,” Robin Bew, the company’s managing director, The Economist Intelligence Unit told CNBC on Monday “Squawk Box Europe”.

This is because once the alliance is established, it may be more inclined to EU integration than in the past. However, he emphasized that given the broader scope of opinions, the tripartite alliance will also be more difficult to manage.

“I don’t think you will see a particularly strong leader,” Bew added.

European issues

The next German government will have to solve many problems in Europe.

One of the main projects at the Eurozone level is the completion of the so-called banking union-the transfer of power from the national banking authorities to European institutions. After the debt crisis, it was slowly introduced, but Germany was particularly cautious about this idea. Many Germans oppose the project, worrying that they may be forced to pay huge bills to support euro countries that are not fiscally conservative.

The view of the European Union and German flags over the German Reichstag where the German Parliament is located.

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The Eurozone will also update its debt and Fiscal rules 2022-this is because the rules have been broken many times, Countries report debt ratios exceeding 60% of GDP, For example, the deviation is expected to continue to exist.

It is not yet clear whether Germany, known for its support of tightening fiscal policies throughout the euro zone, will particularly support changing the debt ceiling.

In addition, the European Union decided in July 2020 to jointly raise funds from the public market to provide funding for the region’s recovery from the pandemic. The so-called recovery fund is considered to be a one-time measure to appease fiscally conservative countries such as the Netherlands, but some experts doubt whether the EU can use it as a permanent tool-this requires the support of the new Germany. The principal is too.

SPD’s Scholz believes that European fiscal rules are flexible enough because they allow countries to increase spending when a pandemic strikes. He also avoided the question of raising EU debt again in the future, saying that this is not a debate on the table.

At the same time, the FDP, which is likely to appear in the next German alliance, has already An analyst at Eurasia Consulting said in a report on Monday that “it has become quite suspicious of Europe in terms of deeper Eurozone integration.”

“Therefore, it is unlikely that Germany’s position on EU debt and fiscal rules will be significantly softened, so it is also impossible to make the recovery fund a permanent feature of the EU’s fiscal structure.”

Another problem for Europe is its ambitious attempt to achieve carbon neutrality by 2050. To achieve this goal, European legislators are discussing specific plans to reduce greenhouse gas emissions by at least 55% by 2030. If it is to achieve green ambitions, Germany, which has a prominent automotive industry, will play a key role here.

Eurasia described Schultz of the Social Democratic Party as a pragmatist in this regard, saying that he would be “willing to use the leeway to help fund Germany’s transition to net zero.”

The President of the European Parliament David Sassoli is one of the few politicians in Europe to comment on the voting results. After congratulating Schultz on his victory, he said: “After this historic crisis, there is no time to waste: Europe needs a strong and reliable Berlin partner to continue our joint efforts for society and green recovery.”

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