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This article appears in the Fall 2017 issue of The American Prospect magazine. Subscribe here.
It has been a torpid summer in Europe. Five hundred eighty people died in France in a freakish June heat wave, and Corsica recorded historic high temperatures in August. Yet the political climate has cooled noticeably since the previous winter of discontent.
Last winter, it seemed possible that the far right could sweep to power in France, while Germany’s hitherto invincible chancellor Angela Merkel appeared to be facing a serious challenge from a resurgent Social Democratic Party (SPD) led by Martin Schulz.
The Brexit vote of June 2016 had also put Europeans on edge. With Britain on the way out of the European Union, the election of a vociferously anti-EU party like France’s Front National might well spell the end of the European project.
And then there was the stunning news from across the pond. The United States had elected Donald Trump, from whose incorrigibly loose lips fell the assertions that NATO was obsolete, that Europeans weren’t paying their fair share of defense costs, and that the American commitment to defend the Baltic States against Russia might not be ironclad. To add insult to injury, the new leader of the Free World noted that his “friend Jim, a very, very substantial guy,” had ended his annual junkets to the City of Light because “Paris is no longer Paris.”
In this morbid environment, Europe came down with a fever, which endured throughout the winter of 2016–2017. But this past spring in Paris the fever broke: On the eve of the 72nd anniversary of VE Day, the French elected 39-year-old Emmanuel Macron as their new president. Macron received 66 percent of the votes cast—a victory decisive enough to turn back the seemingly inexorable tide of populist nationalism that brought the world both Brexit and Trump.
The fever broke, but the chronic underlying illness remains. The Macron cure is illusory. He has put a fresh and youthful face on old ideas, which have proven ineffective in the past. The prospect of quick relief won him a handsome majority (on historically low turnout), but his support has proved soft. Over the course of the summer, his approval rating fell below 40 percent, and the drop was faster than for either of his two immediate predecessors. If he is lucky and scores a quick win on his reform of the labor code, he may stop his slide in the polls—people are still rooting for him to succeed, lest the fever return. But his ultimate success will depend more on improving economic conditions—more luck, in other words—than on enactment of his agenda, which is essentially a series of timid reforms in the spirit of the Hollande-era measure that bears his name, the Loi Macron.
The French are fond of observing that the more things change, the more they remain the same. In one respect, the change was revolutionary. The dominant parties of the center-left and the center-right were demolished. In another respect, little changed at all. The policy menu is the same.
IF FRANCE HANDED Macron’s upstart En Marche party a commanding majority in the National Assembly, Germany ended its brief flirtation with novelty and opted firmly for continuity. The Schulz boomlet collapsed as abruptly as it had arisen in January, when Schulz took over as party leader from Vice Chancellor Sigmar Gabriel.
Eight months ago, polls put the Social Democrats almost equal to Merkel’s Christian Democrats. But in May, just a week after Macron’s victory in France, the CDU scored a stunning upset in the state of North Rhine-Westphalia, normally an SPD stronghold. Schulz’s party fell a full seven points below its result in the previous state elections, popping the Schulz bubble. From a high of 32 percent in the spring, the SPD fell into the low 20s, while Merkel’s CDU/CSU climbed back up to near 40.
Angela Merkel thus seems poised to win a fourth four-year term as Germany’s chancellor. Meanwhile, Macron, backed by a solid majority in the National Assembly, has proposed a major overhaul of the French labor code, which, if successful, will make France look more like Germany. What the French call “the Franco-German” couple (the Germans prefer the term “partnership”) thus enters late middle age, 60 years after the Treaty of Rome, with its deepest fears temporarily allayed but with the tensions that have defined the marriage since the beginning still nagging at both partners.
The near certainty of Merkel’s re-election in Germany limits Macron’s room for maneuver. The young French president ran as a staunch European and, like his two predecessors, flew to Berlin immediately after his election for consultations with the chancellor. Merkel indicated that she was receptive to Macron’s proposals for Eurozone reform and followed up in late August by announcing that she favored his proposal to appoint a single finance minister for the zone and adopt a centralized budget. The August announcement was particularly well timed to signal German support for Macron just as he prepared to disclose the details of his signature labor-code reform.
Eight months ago, polls put Martin Schulz's Social Democrats almost equal to Angela Merkel’s Christian Democrats. But now, Merkel seems poised to win a fourth term as Germany's chancellor. Here, Schulz speaks in Gelsenkirchen.
But there is little enthusiasm in Germany for anything that might smack of a “transfer union,” that is, an arrangement under which German taxpayers would finance investments abroad or accept responsibility for economic stabilization. Any Eurozone budget approved by Germany will therefore be too small to offset downturns elsewhere, much less stimulate new employment in France. The promised cooperation is largely symbolic. Its purpose will be mainly to solidify the united front that both Merkel and Macron want to present to the United Kingdom in negotiations over Brexit. The chancellor wishes the president of the republic the best, for her sake as well as his, but she prefers the term “partnership” for good reason: Any romantic illusions about the nature of the couple lie on the French side.
EUROPE'S PROBLEM THUS remains what it has been since the onset of the Great Recession: Germany has been spared most of the suffering experienced elsewhere on the continent, and German voters see no reason to tamper with success or to coddle the less fortunate. They believe that they owe their good fortune to the austerity they imposed on themselves after reunification.
Many give credit for their present prosperity to the harsh Hartz reforms of the mid-2000s, which weakened longstanding labor protections, as well as to Finance Minister Wolfgang Schäuble’s insistence on strict budgetary discipline throughout the recession. Hence they are reluctant to change course, especially now that the rest of the Eurozone has detected the first green shoots of long-awaited revival: Growth of 1.7 percent is forecast for this year, unemployment is lower than at any time since the crisis, and business optimism, as measured by the purchasing managers’ index, hit a six-year high in May.
The change in the political climate accounts for much of the recent surge of animal spirits. Once the threat that a populist, nationalist, anti-EU, anti-globalization wave might submerge the continent receded, the investment outlook improved dramatically. So did consumer sentiment, especially among those with money to spend: Macron drew his strongest support from the more affluent third of the electorate, and consumer spending in France increased as Macron’s prospects improved. The euro also rose sharply against the dollar, abetted by growing doubts in Europe about the stability of the United States under Trump.
There are reasons for worry, however. Will an increasingly unpopular chief be able to pull off the miracle he has promised, a reform that will please both right and left? Assessing a series of recent political fumbles, veteran French political commentator Alain Duhamel described the rookie president’s summer as “calamitous.”
Macron himself has expressed doubts that he will be able to walk on water much longer. “The French detest reforms,” he said in Bucharest on August 24. But he quickly shifted his ground, suggesting that what he was actually proposing was not “reform” but a new “destiny” that would “show Europe the way to new horizons” and “promote universalism.”
Such lyrical flights may be an essential part of the politician’s toolkit in France. De Gaulle once said that if you want to build superhighways for the French, you have to give them poetry. But Macron’s immediate challenge is not to promote universalism but to pass his promised reform of the labor code—the kind of prosaic, pragmatic effort that Germans find more reassuring than poetry. Throughout the summer, Labor Minister Muriel Pénicaud and Prime Minister Édouard Philippe have been negotiating with unions and business. The goal of the reform is to nudge France toward what Macron likes to describe as a Gallic version of Scandinavian “flexicurity.”
Force Ouvrière, the third-largest union in France, has announced that it will not participate in the general strike called by the second-largest union, the CGT, a potential sign that the government has found a way to allay workers’ concerns. Here, French labour Minister, Muriel Penicaud meet with FO leader Jean Claude Mailly.
ON AUGUST 31, THE details of the reform proposal were finally released. A key provision was a reduction of the maximum indemnity available to employees deemed by a review panel to have been fired without cause. In return, labor received a sweetener: an increase of 25 percent in the compensation due to employees judged to have been laid off for legitimate economic reasons. But, to the unions’ displeasure, employers can now claim to be in economic difficulty if a plant in France is unprofitable, notwithstanding profitable operations outside France. The unions are also unhappy with a provision allowing small firms more room to negotiate with workers directly, without the presence of a union representative.
On the other hand, the government offered a number of new benefits designed to win union support, including a training allowance for union members who wish to expand their skills and a new office to ensure that companies do not violate rules governing collective bargaining.
The olive branch extended to the unions may prove effective. Force Ouvrière, the third-largest union in France, has announced that it will not participate in the general strike called by the second-largest union, the CGT, for September 12. The FO had been one of the most vociferous opponents of a previous labor code reform, so this may be a sign that the government has found a way to allay workers’ concerns.
Not all the signs are positive, however. The country’s largest union, the CFDT, has long been more receptive to liberalization of the labor laws than its two rivals and had already refused to join the CGT. But CFDT leader Laurent Berger said that he was disappointed by the provision narrowing the definition of economic difficulty to operations within French borders.
Berger nevertheless characterized other provisions of the reform as “productive” and “intelligent.” He also indicated that the government had withdrawn certain proposals in response to union objections and said that the final result was not “the destruction of the labor code that some critics have proclaimed.”
As is often the case in French politics, the symbolism of the reform has come to overshadow the substance. The measure is widely seen as a test of Macron’s strength and resolve. Proponents make the exaggerated claim that persistent high unemployment in France is due primarily to labor-market rigidity, which the reform will fix once and for all.
Opponents, led by the fiery orator Jean-Luc Mélenchon of France Insoumise and the mustachioed CGT leader Philippe Martinez, hope to gin up the fervor of their troops by presenting the measure as an all-out assault on the anti-neoliberal resistance. (Although Martinez did not refrain from participating in negotiations to obtain a better deal for his members, he did not back down from his call for a general strike after the results were announced.) Although the clash will be dramatized for maximum political effect on both sides, the outcome looks more like an incremental shift toward lighter labor-market regulation rather than a wholesale jettisoning of France’s byzantine labor code.
Although the French reform takes its inspiration in part from the Hartz reforms, which reduced long-term unemployment compensation and increased incentives to re-enter the work force, Macron did not choose this course simply to please his German partner or demonstrate his neoliberal bona fides. He—along with much of the French government and business elite of which he is a pure product—believes in the virtues of deregulation and competition. Although the French gaze across the Rhine and ogle German success, they recognize that essential ingredients of the German formula are missing in France: For instance, Germans have built trust between employers and unions through decades of what they call Mitbestimmung, or co-determination, whereas France is better-known for “boss-nappings” and wildcat strikes than for boardroom confabs between workers and supervisors. But hope springs eternal.
In Sickness and in Health: German Chancellor Angela Merkel and French President Emmanuel Macron share a moment at the start of the Franco-German Council of Ministers last July.
Meanwhile, Macron has sought to mitigate his pro-business image by jawboning against the practice of hiring so-called posted workers from abroad. These are workers recruited by multinational corporations or staffing agencies from low-wage countries, mostly in Eastern Europe, to work in the West. Under existing EU directives, such employees must be paid the prevailing wage in the country in which they are employed, but taxes and social benefits are charged at the lower rates prevailing in their home countries. Posted workers tend to be at the mercy of the posting agencies, and not protected by local collective bargaining.
The practice creates downward pressure on wages in industries such as construction, where the use of posted workers is widespread. Allegations of unfair competition were a major issue in the 2005 constitutional treaty referendum, on which France voted no. Macron’s stance has raised the salience of this long-smoldering issue and provoked an open breach with Poland, which sends many posted workers abroad. Critics charge him with hypocrisy, because as an enthusiastic proponent of globalization he seems quite willing to expose French workers to indirect competition from low-wage workers in China and Bangladesh while vociferously denouncing the milder direct competition from workers crossing Europe’s internal borders.
This issue is just one of several that have driven a wedge between the countries of Eastern Europe and those of the West. The drift toward authoritarian rule in Hungary and Poland has raised hackles in the West. Brussels has denounced Poland’s move to bring the judiciary under the control of the executive. Hungary’s strongman Viktor Orban has accused Merkel of “moral imperialism” on the refugee issue and rejected what he deems to be Germany’s “gruff, rude, and aggressive” tone.
While the refugee issue has heightened tensions between East and West, it has played a surprisingly small role in the German election campaign. A year ago, the anti-immigrant Alternative for Germany party (AfD) was on the rise. In a regional election last September in the northeast German state of Mecklenburg-West Pomerania, the AfD finished ahead of Merkel’s CDU with more than 21 percent of the vote. Since then, however, the party’s fortunes have been in steady decline. Björn Höcke, a rival of party leader Frauke Petry, shocked many Germans by calling for an end to German atonement for the sins of World War II. Petry herself preferred to emulate Marine Le Pen’s efforts to put distance between her brand of extreme nationalism and sulfurous memories of war and occupation. But the anti-immigrant sentiment that fueled the AfD’s rise seemed to abate as Germany’s efforts to integrate the newcomers proved more successful than anyone had dared hope. As Doug Saunders has written, neither crime nor unemployment increased, and the skill level of the immigrant population proved higher than expected. The example of Germany shows that refugee crises can be handled humanely when a national leader takes a strong and morally principled stand, as Merkel did. As a result, the threat of populist reaction in Germany has subsided, and the AfD is currently polling under 10 percent.
If immigrants are not the issue in the German election that they were in France, what is driving the campaign? The answer: not much. Germany’s politics can seem soporific, even though the country is not without problems. Despite the introduction of a minimum wage in 2015, the poverty rate rose that same year to a record high of 15.7 percent. But Germany is now an export powerhouse, with a current account surplus last year over 8 percent of GDP. Germany’s remarkable economic comeback in the two decades since it was “the sick man of Europe” is the primary reason why French elites are eager to embrace Macron’s reform efforts. But France is unlikely to attain anything like Germany’s export surplus, and if results are slow to appear, current supporters may be as quick to abandon him as he was to abandon his patron François Hollande.
The Grand Coalition of Christian and Social Democrats that has governed Germany for the past four years yokes the two major parties together, so criticism on most matters is muted. Germany’s attention is currently focused on a scandal involving the private sector rather than the government: The major automobile companies are alleged to have conspired to circumvent diesel emissions limits. Anguished discussions of the carmakers’ willful neglect of the environment and public health have replaced debate about the country’s ability to absorb immigrants in the German media.
The parties are caught in a dilemma. Many Germans have laid out good money for diesel cars and would be hit directly in the pocketbook if the offending vehicles were taken off the road. So both parties have promised that there will be no Fahrverbot (order to ban the use of tainted cars) and are pretending to believe that the problem can be remedied by a simple software update. Thus as German politicians seek to persuade the rest of Europe that public virtue is its own reward, the national soul is racked by the revelation of pervasive vice among the private sector’s most respected champions.
Unable to make use of the auto scandal and desperate for a cleaving issue that might animate the final weeks of a lackluster campaign (the election takes place on September 24), Martin Schulz has tried to capitalize on deep German antipathy toward both Donald Trump and American militarism by calling for all American nuclear weapons to be removed from German soil. Yet Merkel has hardly been uncritical of Trump. Regarding differences between Germany and the United States, she noted that “the discord is obvious and it would be dishonest to paper over the conflict.”
Indeed, it is Merkel’s good friend in Paris, Emmanuel Macron, who is more vulnerable to the charge of being soft on Trump. Although Macron delivered a good tongue-lashing after the United States repudiated the Paris climate agreement, he subsequently invited Trump to sit with him on Bastille Day to review the troops.
If Macron’s grandstanding rankled Merkel, she did not show it. She rarely displays emotion, preferring to move quietly and unobtrusively toward her goal, the true nature of which is best known to herself alone. In this, the final term of her unprecedented chancellorship, she will define her place in history. The last thing she wants is to preside over the demise of the European Union, which has been fundamental to her success. Merkel knows that if Macron fails, the Front National, now riven by factional rivalries in the wake of Marine Le Pen’s loss, is waiting in the wings. Hence she will do what she judges she can to help Macron vanquish his opposition.
Her imagination lacks a tragic dimension, however. She thinks that virtue is perforce rewarded and that all Macron needs to succeed is to stick to the path of righteousness, keep the books balanced, and do a better job of concealing his arrogance. In all three respects he will probably disappoint her. The couple may nevertheless succeed in navigating this turbulent passage, because old couples are loath to change. They muddle through, if not for the sake of the children then out of sheer habit. With the threat of populist upheaval damped down for the moment, the grown-ups’ sense of urgency has dissipated. They think they have all the time in the world. They could be wrong.