We are divergent…
A new opening in the debate on the EU’s future initiated by Emmanuel Macron’s proposals for greater integration has brought into sharp relief rifts within the community along traditional fault lines. These conflicting visions reflect the structural and developmental imbalances that divide the Member States. Hardly any pan-EU systemic reforms can be carried out, for instance, without France, Germany and Poland, which are three very different countries. France, which traditionally represents “the South” of the Eurozone, stands in contrast to the North, dominated by Germany. Poland is a “young” Central and Eastern European member state, whose region is still catching up with the “old” EU. Meanwhile, Germany, defender of EU unity as a whole, is contradicted by France with its plans to speed ahead in integrating the core of Europe and no longer wait for the more reluctant states to come on board.
While the EU was conceived to ensure that all Member States would prosper by pursuing a balanced social development, unequal social development is a key factor differentiating these three key countries and lies behind their disagreements. What’s more, key economic indicators show that discrepancies in living standards between EU countries remain as pronounced as ever. As shown in the figure below, monthly minimum wages – always an excellent measure of the standard of living – in the CEE Member States are significantly lower when compared to Western EU countries. This has recently sparked arguments across the Union over social standards.
…but not so different after all
The divisions of Europe regarding the pace of economic development run along similar lines as those pertaining to social standards, although here the roles are reversed. It is in fact the newer member states that are growing faster than the older ones (see figure below). What this shows is that the promised catch-up, evening out of economic capabilities and convergence are indeed under way.
Monthly minimum wages in €
Percent annual increase in GDP (selected EU countries, 2017)
|Czech Republic||419||The Netherlands||3.2|
Sources: Eurostat, European Commission
The figure above suggests that differences within the EU help to accelerate its overall economic development. Convergence, defined as raising countries with lower wages and social standards to higher levels akin to those of the North, has fueled an economic upswing throughout the EU – for the benefit of all Member States.
The Weimar Triangle – a laboratory of compromise
The process of convergence is visible within the Weimar Triangle, as in the figure above where Poland sits in an opposite group to France and Germany.
Despite the many differences among the trio that make up the Weimar Triangle, their relations can be viewed through another lens by focusing on their potential capacity to see eye to eye. This potential can be revealed via a multi-faceted and segmented analysis: examples include relations among entrepreneurs, employees and organizations as well as selected European agenda issues.
The chart below shows a simplified comparison of France, Germany and Poland in terms of the quality of social standards in their labor markets as well as their approach to the single market and its four freedoms. An example is given of two specific aspects of the broad European policy agenda with a view to highlighting the areas in which the countries could reach out to the others.
As shown in the above chart, both countries have extensive social systems that they wish to protect. Germany’s support for France’s protectionist (in Polish eyes) approach to the posting of workers was dictated in part by its desire to safeguard its own national social system (that Macron also saw as paramount). However, an even stronger motivation was rooted in Germany’s desire to persuade France to commit to reform its labor market.
A stable eurozone and a well-functioning liberal European internal market are critical for both Germany and France. The development and competitiveness of that market hinges on the inseparability of its four freedoms as well as on success in maintaining upward convergence trends in the (CEE) countries trying to catch up, raising their wage levels and improving their social conditions. French and German success in successfully growing the single market depends largely on the economic performance of the entire EU.
An example for Franco-German cooperation based on readiness for compromise is the process of EU reforms, in which both countries aspire to the lead role. The impulse delivered by Macron required a response from Merkel, which is to be expected after long-awaited completion of a new German government. Both countries’ main focus is to make the Eurozone shock-resistant. They show willingness to make concessions in order to overcome a long-standing deadlock on the architecture and functioning of the monetary union. Examples include Germany softening its traditional resistance to some measures proposed by France (e.g. developing the European Stability Mechanism into a European Monetary Fund and completion of the banking union) and focusing on other fields of cooperation such as immigration policy, defense, trade and taxes; as well as France stepping back from its propositions for institutional changes that are hard to accept for Germany (e.g. creating eurozone finance minister and parliament) and putting others off until later (e.g. creation of the eurozone budget).
Germany – Poland
The Visegrád Group is Germany’s key trading partner in terms of volume. Their cooperation centers on the EU’s free internal market, which is why both Germany and Poland propose to preserve the four basic freedoms of movement while opposing protectionist sentiments (as shown in the chart above). The conditions found on the Polish market make it a good place for German investors. On the other hand, Polish companies are growing rapidly as providers of quality services in Germany. As the system benefits both countries, no restrictions are being imposed on Germany’s strong presence in Poland, despite many public statements to the contrary.
The controversial issue of posted workers requires a multifaceted approach. Despite the disagreement at a political level, business communities in Germany and Poland share criticism of the changes to the posting directive. They see the European Commission’s proposals (supported by France and French companies) as mistaken, causing over-regulation and not tackling real problems, such as abuses of the posting system. In this area, Polish and German businesses may spearhead a different outcome to that sought by Macron.
Political and economic relations with Poland and other Eastern EU Member States matter greatly for Germany. The new German government is therefore expected to consistently acknowledge their position and try to engage them – if possible – in the process of further integration as a counterbalance to France’s push for a multi-speed EU. Backing the EU’s unity, inclusiveness and gradual/moderate advancement of the European project could be a shared policy formulated by Germany and Poland.
Poland – France
France stands to benefit from Poland receiving continued assistance through structural funds on the one hand and from investing in the Polish market on the other. This offers an opportunity for overcoming hurdles imposed by geographical distance and helping France to enjoy similar benefits to those that Germany derives from its relationship with Poland. However, free market cooperation can only be achieved if the four freedoms of movement are respected. Freedom to provide services abroad is crucial for Polish economic capability, just as maintaining high-quality social protection for French employees is for France. To put an end to misunderstandings, including those regarding posted workers, both sides need to be open to each other’s point of view and try to find common ground, focusing e. g. on the level of investment and business cooperation.
Higher wages and social standards in Poland and other CEE countries and their economic convergence (upwards) benefit the entire EU, including France. For Poland and France, this provides an opportunity to overcome such domestic problems as unemployment that still remains above the EU average in both countries, despite a rising trend. Such convergence may be seen as a crucial prerequisite for closer eurozone integration – France’s priority.
The example of France, Germany and Poland shows how multi-layered and compromise-based cooperation could prevail over and above historic divisions and developmental differences. The Weimar Triangle has the potential to become a laboratory in which a European compromise may be forged. This would facilitate a debate on the future of the EU, the development of its internal labor market and the defining of Social Europe.