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Macron’s real limits

Apr 25,2018 - Last updated at Apr 25,2018

FRANKFURT — When Emmanuel Macron was recently interviewed by two very aggressive journalists, the result was not exactly the “ideal speech situation” cherished by Jürgen Habermas, the towering German philosopher and great supporter of the French president. But, despite being repeatedly interrupted, Macron fared very well. Always concrete and willing, if necessary, to delve into the minutiae of an issue, Macron was clearly on top of his game. He needed no speaking notes, as he also admirably demonstrated in his speech condemning nationalism and populism at the European Parliament a few days later.

His meeting with German Chancellor Angela Merkel in Berlin that same week, however, was much different in both tone and substance. Most importantly, it demonstrated the limits of the méthode Macron: Seemingly compelling oratory does not necessarily translate into feasible policies.

Politics, at its core, reflects the interplay of interests at the national level. And that is precisely where Macron’s ideas about redesigning Europe’s institutional architecture arrive at an impasse. His proposals are too numerous and vague to judge, and they do not account for the state of debate at the national level, where scepticism is on the rise. Being positive about Europe comes at a cost.

For northern Europeans, two prospects raise particular concern: risk sharing, for example, in underwriting retail bank deposits, and a eurozone budget.

Of course, a fragmented banking system complicates a single monetary policy. Some academic economists, as well as the rare policymaker, such as the late Tommaso Padoa-Schioppa, called for centralised supervision of financial institutions long before the Euro crisis erupted. At least in some respects, such “Europeanisation” of supervision has been established, with the European Central Bank serving as the eurozone’s banking watchdog and the Single Resolution Board dealing with vulnerable banks.

But guaranteeing retail deposits remains a task for the eurozone’s individual member states. Hence, the quality of those guarantees varies, with some members vulnerable to bank runs. But in northern Europeans’  quite reasonable view, insurance after an accident has occurred — think of non-performing loans — is a form of redistribution that shifts the burden to innocent bystanders, in this case, northern taxpayers. As German and Dutch officials, in particular, have argued, banks’ financial health must be addressed before completion of European banking union can take place.

Europeanisation of deposit insurance would also mean that eurozone member states would, if push came to shove, lose any authority over banking politics. A eurozone institution, democratically accountable, would have to be charged with this.

But it is in regard to the proposed eurozone budget that Macron’s ideas are the least specific. And it is here where political resistance is the strongest, again, for reasons that are not difficult to understand.

A common eurozone budget has been presented as both a stabilising mechanism and an investment tool. But, under normal circumstances, national public-sector budgets already perform the stabilising role automatically, through unemployment insurance, progressive taxation and the like, and this is a derived role, not the primary objective. What is needed is a security valve for eurozone countries that face temporary and particularly difficult challenges. And an investment budget has little to do with the purpose of a stabilising mechanism: to cushion economic shocks.

So the substance of Macron’s economic-policy suggestions is, frankly, confusing. And even if Merkel were to embrace them, she would be an easy target for political attack, and not just from the opposition Alternative für Deutschland, but also from within her Christian Democratic Union and its sister party, the Christian Social Union, not to mention the Social Democrats.

There is no avoiding the national political dimension in the EU, given that every leader needs to be elected and that most want to be reelected. Merkel’s idea of establishing a eurozone super committee that would partly substitute for the Eurogroup of eurozone finance ministers, which Dutch Prime Minister Mark Rutte already proposed to no avail would complicate things even further.

Yes, such a committee would bring Merkel the added political benefit of constraining the influence of Social Democrat Olaf Scholz, her Vice Chancellor and finance minister. But, in terms of substance, there was no need for her proposal. Scholz immediately endorsed the schwarze Null (balanced budget) of his predecessor, Wolfgang Schäuble. Given the German public’s deep-rooted sentiment in favour of fiscal probity, anything else would have been politically self-defeating. Indeed, with even Macron pursuing it, the schwarze Null has come back with a vengeance. But that does not make it a less flimsy economic concept, one that cannot be found in any economics textbook.

This is the fundamental problem of the méthode Macron: his policy pronouncements, vague to the point of not being implementable, somehow lack the courage of his European convictions. Proposals by the French Treasury,  from 2014, for example, presented much more detailed policy options to achieve the ends that Macron appears to seek, as did proposals developed by Italian Finance Minister Pier Carlo Padoan in 2015.

Macron’s method is also marked by a strong reliance on an intergovernmental approach, which most likely reflects his understanding of French voters’ current mood. At least in this respect, the exchange between Macron and his two impertinent interlocutors last week was highly enlightening. The self-declared representatives of French society’s deep frustration did not touch on European issues at all.

They did so for a reason. Many French do not hold “Europe”, meaning the European Commission in Brussels, in high standing, and, as the 2005 referendum on a European constitution showed, that has been true for some time. So any vote based on the ideas sketched in Macron’s various speeches is unlikely to turn out favourably. In this context, Merkel’s insistence on the need to amend the Treaty on the European Union, which would require referenda in the member states, to establish Macron’s proposed European Monetary Fund is a barely hidden way of saying “nein”.

Macron’s commitment to disinterested dialogue, à la Habermas, is admirable. But unless and until he gets his hands as dirty with European politics as he seems willing to do for the sake of domestic French reforms, those dialogues will remain ephemeral, if not just plain hot air.


Hans-Helmut Kotz, a former member of the executive board of Deutsche Bundesbank, is programme director of the SAFE Policy Centre at the Goethe University in Frankfurt and a resident fellow at the Centre for European Studies at Harvard University. Copyright: Project Syndicate, 2018.

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