Six Months of German Crisis Presidency: A Review

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The German EU Council Presidency is coming to an end. It faced the challenge of having to ensure the functioning of the EU and its ability to act under the conditions of the Covid-19-crisis while trying to implement its own programme. Given the circumstances, Germany has done well. Nevertheless, in some important economic policy areas it was unable to meet the expectations placed in it.

Already without Covid-19 the EU faced major challenges this year. On the one hand, negotiations on the next Multiannual Financial Framework (MFF) had to be concluded so that the EU budget and the EU support programme could enter into force on time next year. On the other hand, the future relationship with the United Kingdom had to be clarified - here, above all, Germany had to preserve the unity of the EU vis-à-vis Great Britain. And finally, a number of other issues demanded strong leadership by the German presidency: trade conflicts with the United States and China, foreign policy turbulences with Russia and Turkey, implementation of the Green Deal and the Digital Strategy, expansion of the EU into the Western Balkans - in short, the list of work assignments and expectations for Berlin was long.

But then came Covid-19. Starting in mid-March, EU governments commenced to impose national lockdowns and even closed their borders for some time. Initially, Brussels and Berlin had hoped to return to some sort of normality over the following months. However, up until today, the work capacities of the EU institutions remain restricted due to mandatory teleworking and limited technical capacities for the deliberation and voting processes in the Council and Parliament. 

Therefore, the German government was forced to adjust its objectives for the presidency and reprioritise its work program. The immediate crisis management and the EU budget, including the reconstruction plan, became the new top priority. After that, preference was given to those dossiers that legally had to be dealt with by the end of 2020. Finally, the implementation of the priorities of the original presidency program depended on the availability of the necessary resources. Where possible, other projects should be realised within the framework of the trio presidency with Portugal and Slovenia in 2021.

Historic 1.8 trillion financial package as major success

First, Germany achieved a major breakthrough. After Chancellor Merkel and French President Macron had cleared the way for joint EU debt for the first time in their meeting at Meseberg castle, the Chancellor was able to secure the necessary agreement of the other EU countries to a historic financial package of 1.8 trillion euros at the subsequent EU summit in July - including 1074 billion euros for the next seven-year budget framework and 750 billion euros for a stimulus and investment program to counter the consequences of the pandemic crisis.

However, the way ahead would be bumpy. Initially, the European Parliament blocked the compromise of the EU states, demanding improvements in the area of research spending as well as a specification of the rule of law conditionality for the allocation of EU funds. An agreement was finally reached with the EU Parliament; all that was missing was its adoption by the EU heads of states and governments. However, Hungary and Poland vehemently opposed the rule of law mechanism and blocked the budget for several weeks. After intense negotiations, in December the German government managed to broker a compromise that leaves the initial text of the Regulation unchanged but carries an annex in which the concerns of Poland and Hungary are addressed. This allowed Germany to successfully conclude the budget negotiations still under its presidency – a great success.

Unity of EU vis-à-vis Great Britain preserved

The negotiations with the United Kingdom on the country’s post-Brexit relationship with the EU proved similarly difficult. This was due less to the German presidency than to London’s obstructive attitude in important questions such as state aid and a level playing field, access of EU fishermen to British waters and the question of dispute settlement. Throughout 2020, both sides managed to continue negotiations despite repeated cancellation threats made by the British side and numerous expired deadlines. However, even if an agreement can ultimately be found, it is unlikely that the deal will be a great success. As for the German presidency, the fact that it maintained unity and solidarity among the EU states towards London until the end is certainly an important achievement.

Economic policy in the background

Considering these circumstances, it is not surprising that other economic policy issues took a back seat. Germany managed to continue work on ongoing dossiers such as the very ambitious climate bill (on which the agreement with the European Parliament is still pending), the maintenance of the Single Market and the reform of export controls. In the area of trade policy, however (investment agreement with China and free trade agreement with the Mercosur states) the German presidency was unable to meet the expectations placed in it. The fact that under German leadership the Mercosur agreement could not be sealed, while at the same time RCEP is creating the world’s largest free trade zone in Asia, is particularly regrettable from the viewpoint of German industry. A stronger support for the agreement by Berlin in would have been desirable.

On the other hand, the conclusions of the Competitiveness Council on EU industrial policy adopted in November under German leadership are a positive outcome. One of BDI's central requests, to define the strengthening of industrial competitiveness as an equal EU policy objective alongside climate protection and digitisation, has been taken into account. Council also calls upon the Commission to develop performance indicators for monitoring the implementation of the EU industrial strategy by March 2021, which will enable a comparison of industrial competitiveness in a global context. This was also a key demand of BDI.

Finally, Germany also made an important achievement in the area of digital and innovation policy. Against initial resistance from several EU member states, it succeeded in adopting Council conclusions on the creation of so-called European regulatory sandboxes. Regulatory sandboxes offer the possibility to test new innovative products and services, for which no generally applicable EU legal framework yet exists, in EU-wide pilot projects under real conditions. Based on these pilots, suitable regulatory solutions can be developed which helps increasing the EU's regulatory agility and innovation capacity.