Merkel’s poll win unlikely to make much difference to Brexit, analysts say

Germany’s federal elections, whatever coalition Angela Merkel forms after the victory of her CDU party, are unlikely to make much difference to Brexit – but may well make euro reform more difficult.

Analysts and commentators say Brexit campaigners’ hopes that with the vote behind her, Merkel – especially if, as seems likely, her government includes the pro-business Free Democratic party (FDP) – would back a favourable deal for the UK were always misplaced.

The EU and single market are a “core national interest” for Germany, “essential to its stability, security and prosperity”, said Christian Odendahl of the Centre for European Reform. All major parties and most voters bar the 13% who cast their ballots for the anti-immigrant AfD want more EU cooperation, not less.

The FDP may be more pro-business, but it will be a junior partner in the likely coalition and got badly burned the last time it governed with the CDU. It will use its few bargaining chips “very carefully, and almost certainly not on Brexit”, Odendahl said.

Brexit campaigners are also wrong to argue that the value of its trade with the UK – particularly exports – means German industry will inevitably press politicians into demanding a softer Brexit, Odendahl argued.

The idea that Germany would buy into something “because of the number of cars BMW sells is misleading”, he said. “Of course German industry wants to limit any economic damage – but not at a cost to the single market.”

German businesses have “made the best possible use of the single market, with complex supply chains across the continent. Nothing is more important to them than the single market, its rules and institutions.”

Hans Kundnani of the German Marshall Fund thinktank agreed that the parties that could join a CDU-led coalition – the FDP, and the Greens – “share the view that the EU must be held together, and that to do so … the UK cannot enjoy the benefits of the single market without the costs”.

Kundnani said Germany was indeed driven by economic interest, but its economic interest was “long term rather than short term … which means preserving the cohesion of the EU and the single market”, not protecting the German car industry from the limited effects of a hard Brexit.

On the broader question of the impact of Merkel’s re-election on the EU’s future direction, Odendahl said hopes that the chancellor – whose room for manoeuvre has been constrained by the CDU’s poor election showing – would change from “a pragmatic tactician to a strategic visionary” were also largely overblown. “This will not be a watershed moment,” he said.

He predicted “subtle changes” to the eurozone and maybe “a face-saving deal to make things easier” for the French president, Emmanuel Macron, who wants a eurozone finance minister and budget to finance growth-oriented investment and extend financial assistance to struggling member states.

But the shape of the new German cabinet means wholesale eurozone reforms are on balance unlikely, analysts say. Joerg Forbrig, a German Marshall Fund fellow, said Merkel was not “negative” to Macron’s proposals, but “will meet a lot of opposition from within her own party if she wants to meet Macron halfway”.

The FDP leader, Christian Lindner, made clear on Sunday night that any eurozone reform that entailed major fiscal transfers as part of a eurozone budget and cost Germany money would be “a line in the sand”.

The idea that Merkel can “try to push through some big new initiative that may not be popular … It’s not going to happen,” Kundnani said. “Plus there is consensus now in Germany that the country’s central role in Europe is to hold things together, reconcile the views of the 27. That will be her focus.”

Analysts do, however, see Merkel’s victory giving a fresh impetus to European defence integration. The chancellor has already stated her belief that the strains within the transatlantic relationship following the election of Donald Trump demand a gear-change in cooperation on external security.

“The two questions that will decide the future of Europe are the eurozone and Schengen and the refugee question,” said Kundnani. “Because those are so difficult to resolve, the ‘displacement activity’ became defence and security.”

Trump’s election made that issue “existential”, he said. “European defence and security are now a very strong German national interest.”

Some analysts have sketched the outlines of a possible “grand bargain” between France and Germany, with Germany making major eurozone concessions and France providing greater security guarantees.

But Kundnani said there remained “big differences” between the French and German positions, and many in Berlin reject any suggestion that reform, no matter how good for Europe and Macron, should come at a cost to Germany.