Foreign Policy Research Institute A Nation Must Think Before it Acts Merkel’s Foreign Policy Muddle
Merkel’s Foreign Policy Muddle

Merkel’s Foreign Policy Muddle

Whether “Queen of Europe” or “Leader of the Free World,” German Chancellor Angela Merkel has acquired many accolades in nearly fifteen years at the helm of Germany and of Europe. But today German power is fading, in no small part because Merkel has run out of ideas. Strategic thinking has been put on hold as the country awaits the end of the Merkel era.

This could come sooner than many expect. Last week, the Chancellor’s coalition partner, the Social Democratic Party, chose a new leadership team that is skeptical of their party’s collaboration with Merkel’s Christian Democratic Union (CDU). This could accelerate the breakup of the coalition and bring forward the date of new elections—a vote that could bring the Merkel era to a close.

Until then, however, with Merkel at the helm, German foreign policy is a muddle. Berlin faces more foreign policy challenges today than at any point since the country’s reunification in 1990—an aggressive Russia, a rising China, a divisive relationship with Washington, and ongoing disagreements with France about the European Union’s future. The world’s great powers are jockeying for influence with assertiveness unseen for several decades. Merkel’s Germany is stuck in the middle, under pressure from all sides.

At the peak of her power, Merkel was Europe’s center of gravity, the politician who could forge consensus among quarrelsome European leaders. Now she is not even able to forge a consensus in her own political party, which is openly divided over foreign policy. Even worse, the chancellor hides in the background, hoping that if she closes her eyes, the geopolitical shockwaves reverberating across Europe will somehow pass Germany by.

After the Cold War’s end, Germany made three big bets: on the transatlantic relationship, the European Union, and on China’s growing market. NATO and the U.S. would keep Germany secure without Berlin having to pay. China would buy vast quantities of goods without demanding anything in return. And European integration would spread German influence without making its neighbors fearful.

For a while, this bet worked like magic. Today it is all going wrong. U.S. President Donald J. Trump criticizes Germany for free-riding on the NATO security guarantee and wants Germany to reduce its trade surplus. The European Union, meanwhile, has hit a rut. Germans politicians are frustrated with Washington’s  unilateralism and like slogans such as “Europe is the future.” But in fact, Berlin wants to keep the U.S. on board, because playing power politics on their own makes Germans deeply uncomfortable. Meanwhile, China’s economic slowdown and intensifying authoritarianism makes being China’s best friend a much less appealing proposition. 

This is the set of circumstances that led French President Emmanuel Macron to declare that NATO was “brain dead” and to urge Europe to bolster its own autonomy. The French are thinking strategically about Europe’s role in a world of power politics. The EU’s Eastern member states, meanwhile, want to invest more in NATO to hedge against Russia. German officials such as Foreign Minister Heiko Maas say that their country “wants and needs NATO.” Yet they do not hesitate to welcome a divisive new Russian gas pipeline, Nord Stream II, that is opposed not only by Washington but by many of Germany’s Central European neighbors. For three decades, Berlin’s partners have done the heavy lifting providing for the alliance’s security . No wonder that the German government’s main approach to NATO is to insist that the alliance works perfectly and that nothing should change.

The contradictions in Germany’s relations with Beijing are even deeper. China surpassed the U.S. as Germany’s biggest trading partner in 2016, thanks in part to Merkel’s schmoozing of the Middle Kingdom’s leaders. Berlin is planning an EU-China summit in Leipzig next year that should set the stage for the signing of a long-coveted bilateral investment treaty. Yet the German political elite is deeply divided about how to approach China’s growing power and technological prowess. Is China a partner or a competitor? The answer will shape Germany’ role in the world and its relationship with the U.S. 

Take the question of whether to let Huawei install 5G technology in German cell networks. Some lawmakers from Merkel’s center-right CDU want to ban Huawei, with Norbert Röttgen, a legislator in Merkel’s party, declaring the issue an “imminent question of national security.” Yet Economy Minister Peter Altmaier has argued that shutting out Chinese companies is wrong, on the grounds that the U.S. also demands “information needed to fight terrorism.” Merkel’s own intelligence agencies have urged a hawkish line, while the Chinese Ambassador to Berlin has threatened “serious damage” to relations if Huawei is not allowed in.

Pressed by the United States and by China, one response could be to bolster Europe. German politicians like to declare that “Europe is the answer!” to any major question. Yet Berlin’s European partners have noticed that, when push comes to shove, Germany has often undermined Europe taking a common and principled position in pursuit of parochial and at times short-sighted German interests. When Trump slapped tariffs on European steel and aluminum and threatened to hit autos next, Berlin pressed its EU partners to negotiate a free-trade agreement with Washington. And when Trump threatened Paris and Berlin over a proposed European tax on tech companies, Germany withdraw its support.

The issue is not only that Germany is often quick to cave to foreign powers, as soon as maintaining a position comes at a cost. Berlin has also been hesitant to treat the European Union as a player on the world stage, by failing to resolve the internal problems that limit the union’s ability to act in a united fashion. Merkel remains imprisoned by the fiscal straight jacket that has governed German policy since the Eurozone crisis. Germany of course has a long tradition of denying the utility of macroeconomic management. And the German constitution’s debt brake, which allows significant deficit spending only if the country’s legislators declare an economic “emergency”, handicaps the country’s fiscal room for maneuver.

But Germany’s aversion to economic policy making has become debilitating for foreign policy, too. The country has comparatively little government debt, and is running a budget surplus. More importantly, because demand for German government debt is so great, the government can borrow at a profit—yes, at a profit—over fifteen years. Financial markets are willing to pay Germany for the opportunity to hold its government bonds, but Germany still cannot be convinced to spend.

Set aside German claims to NATO partners that their country lacks the funds to spend 2% of GDP on defense. The bigger issue is that Germany’s fiscal straightjacket undermines European unity. The EU would be stronger if Germany spent more. Unemployment in Southern Europe is higher than it needs to be, in part because of Germany’s support for tough deficit targets. This fuels populism that undermines the EU’s coherence. Yet Merkel’s Germany continues to object to expanded investment at the European level that could resolve some of the continent’s political and economic dilemmas.

Foreign policy is most successful when accompanied by supportive macroeconomics. Trump has been able to ramp up the trade war because the economy is supported by an extraordinarily large budget deficit. China’s economy is holding up thanks to Beijing’s fiscal and monetary stimulus measures. By contrast, rather than projecting power, Germany is focusing on paying down its government debt, even though investors are willing to pay it to do the opposite.

Lacking a solid European foundation for German foreign policy and a willingness to use macroeconomic policy to bolster geopolitical aims Berlin struggles to stand up to the great powers. German foreign policy has therefore degenerated into a process of promising concessions to all sides. Merkel says she wants to raise military spending and negotiate a trade deal to satisfy Trump, though she has no plans and or the authority to do either. To keep China happy, she does not object to letting Huawei into 5G networks. But to address U.S. critiques, she promises “high security standards.” What this balance means in practice, even Merkel cannot say.

Offering everyone concessions is a strategy of a sort, but even Germany’s legislature—notoriously wary of any foreign policies that might be called assertive—is pushing for a tougher line. So long as Merkel was strong at home, she could keep doubts about her lack of strategic direction in check. But the contradictions are only growing. Now even her own party has erupted in opposition. 

Hedging and compromising are tactics that have served Merkel well in Germany’s domestic politics. In the realm of foreign affairs they are substantially less appealing, especially in a moment of geopolitical flux. Yet this is the only toolkit Merkel knows. So long as she is in power, Berlin is doomed to a foreign policy of drift and indecision.