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Merkel: We have to fight for our own future
00:45 - Source: CNN

Editor’s Note: Parag Khanna is a senior research fellow in the Centre on Asia and Globalisation at the Lee Kuan Yew School of Public Policy at the National University of Singapore. The opinions in this article belong to the author.

CNN  — 

Angela Merkel has had enough. Just a day after the perfunctory G7 meeting in Sicily, she returned to Germany and declared to an audience in Munich that the United States and UK are no longer reliable partners, and that the US in particular has “weakened the West” and is out to undermine the European Union.

This isn’t the first time Merkel has stepped up to defend Europe’s honor. In a similar speech in January, she warned the United States that it had no “eternal guarantee” of cooperation from Europe.

At a time when Donald Trump is scolding Europeans to pay more for their own defense, he should be careful what he wishes for. A trans-Atlantic divorce – or parting of the ways – has long been in the offing.

Europe’s new found confidence stems partially from Brexit. Brussels, Luxembourg and Berlin have been running circles around London in the Brexit negotiations, throwing British politics into disarray with an election looming.

With the British strategy toward negotiating its exit from the EU a shambles, “old Europe” feels it has cast off England’s yoke that regularly acted against the interests of wider and deeper union.

Then there’s the pro-European results of the Dutch election in March and France’s recent election: another a decisive victory for European unity.

Emmanuel Macron clearly held his own in his first extended handshake with Trump – and made sure to greet Merkel before Trump (or any other head of state) when the leaders assembled in Sicily.

Together, Merkel and Macron implicitly know they are the new Franco-German axis that must, as Merkel said in Munich, “fight for our own future and destiny as Europeans.”

These election results, combined with the eurozone exceeding economic growth expectations this year, mean that it faces little risk of falling apart as so many have been predicting for nearly a decade.

The big question that will dictate the future of Europe is to what extent Merkel gives ground on the strict posture her government has taken toward issues such as Greece’s debt and Italy’s banking sector.

Though she is poised to win September’s election and enter a fourth term as Chancellor, she may need to form a “grand coalition” once again with the rival Social Democrats. And if the critical post of finance minister then goes to her election opponent Martin Schulz, he could bend Merkel in the direction of greater fiscal solidarity with southern Europe’s ailing economies. With nothing left to lose politically, she might well offer them a bit more flexibility.

Even if Europe’s rebound continues along a bumpy path, make no mistake that Trump’s naked desire to keep Europe weak and lack of commitment to the Paris Agreement on climate change are the straw breaking the camel’s back. Europeans aren’t going to wait for a Trump impeachment to plan for life beyond the American alliance. However much they may disagree on finance and immigration, finding unity in distinguishing themselves from American policy matters significantly.

The next step is for Europe to return to policies that make it a whole greater than the sum of its parts. There is no lifeline like the liquidity that comes from pooling economies.

Now could be the time for the institutional modifications seen as unnecessary before the financial crisis and politically infeasible since: A fiscal compact, capital markets framework and banking union – all of which, if interest rates can be yanked ever so slightly into positive territory, will enable genuine restructuring and attract trillions into the Eurobond market. Given time and support, the model works.

Europe would then be better equipped for the mercurial geopolitical theater in which it must now act with far greater autonomy. Remember that this – not trying to wind up Trump – was the main thrust of Merkel’s Munich speech.

While Trump has accused Germany of being “very bad” on trade for its large surpluses, Germany and other European exporters have a massive and willing market for their goods: Asia.

Indeed, the EU’s trade with China, Japan, India, Australia, South Korea and Southeast Asia already exceeds its trade with the United States by about $300 billion per year – and this has occurred before Europe grants China “market economy” status or signs free trade agreements with Japan, India and others.

Europeans were an active presence at Beijing’s One Belt, One Road summit two weeks ago. The Belt and Road Initiative is the largest coordinated infrastructure investment program in human history, and could easily generate $2 trillion per year in trade between Europe and Asia. Washington may soon realize that Europe is the swing superpower between the United States and China – and is leaning toward Eurasian connectivity.

This has enormous implications for two other major foreign policy challenges for the Trump administration: Russia and Iran. Amid serious allegations of Trump’s campaign staff and son-in-law having murky dealings with the Kremlin, Trump is being forced to appear tough on Russia even though it goes against his and Secretary of State Rex Tillerson’s actual goals.

But as Washington’s Russia policy remains handcuffed by the ongoing investigations, count on Europe to break rank and re-engage with Russia, capturing new business opportunities as the economy recovers.

A similar pattern will surely unfold with Iran. After Trump’s tough anti-Iranian talk in Saudi Arabia, Europe is sure to lose patience with the American policy of futile confrontation. Neither sanctions nor isolation have worked to weaken Iran’s clerical regime.

Meanwhile, President Hassan Rouhani’s convincing re-election means continuity in Iran’s desire for greater engagement with the West. For many European companies, the train has left the station: Big ticket deals in energy, infrastructure, real estate and other sectors won’t wait for Trump to get on board.

The stars are aligning for Europe to reclaim a central role in the global strategic balance. Merkel and Macron are reminding their peers of the region’s timeless strengths: world-class infrastructure, efficient midsize cities, social-democratic politics, locally rooted businesses, low inequality and rich cultural traditions.

Take a deep breath: The 21st century will be neither the American nor the Chinese. Europe is going to do whatever it can to remain at the center of the map.