In its 2019 Third-Quarter Forecast, Stratfor anticipated tough negotiations to appoint the leaders of the main EU institutions. We noted that the so-called Spitzenkandidat mechanism would be abandoned and that the nominations would be the result of a compromise between France and Germany. This week's events are in line with those predictions.
Leaders of the 28 EU member states proposed a list of candidates on July 2 after a three-day summit to fill some of the bloc's main roles. They chose German Defense Minister Ursula von der Leyen as their nominee to lead the European Commission and acting Spanish Foreign Minister Josep Borrell as the new EU foreign policy chief. If the European Parliament approves their candidacies in a July 15 vote, their five-year terms will begin in October. The EU leaders also chose the chief of the International Monetary Fund (IMF), Christine Lagarde of France, to lead the European Central Bank (ECB) starting in November. Additionally, acting Belgian Prime Minister Charles Michel was appointed as the new president of the European Council. Separately, the European Parliament on July 3 elected Italian socialist David-Maria Sassoli as its new president.
Why It Matters
Of all these decisions, those on the European Commission and the ECB are the most important. The European Commission is the executive arm of the European Union, and proposes and enforces policy; the ECB sets monetary policy for the eurozone. Both appointments happened after complex negotiations among member states.
Under pressure from France, the so-called Spitzenkandidat mechanism, under which the president of the Commission should be the leading candidate of the largest party in the European Parliament, was not used. This killed the candidacy of the leading candidate of the European People's Party, the German conservative Manfred Weber. Von der Leyen was a compromise solution between Paris and Berlin, which will give Germany the presidency of the Commission for the first time in six decades. While von der Leyen supports EU federalization, she has often been criticized at home for her handling of the German military, and her positions on many policy issues are unknown. On Brexit, one of the Commission's most urgent challenges, she has argued in favor of seeking compromises with the United Kingdom.
This time around, France and Germany, the two biggest members of the European Union, went for direct control of the two main institutions, the European Commission and the ECB.
Lagarde was French President Emmanuel Macron's choice. The French lawyer does not have a track record on monetary policy because she has never presided over a central bank. But she is likely to continue with the policies of current ECB President Mario Draghi, which over the years have included bond-buying programs and record-low interest rates. In this regard, Lagarde is good news for Southern European countries, which have benefited from Draghi's policies — and who opposed a German taking over the ECB. But Lagarde will inherit an ECB that is running out of tools to boost inflation and contribute to sustained economic growth in the eurozone.
The Balance of Power
The July 2 decisions showed that true power in the European Union is still in the hands of its core members. France and Germany have often operated through proxies, with smaller countries in line with their views getting core positions. This time around, the two biggest members of the European Union went for direct control of the two main institutions, the commission and the ECB. Central and Eastern European countries managed to block the nomination for the commission of the socialist Spitzenkandidat Frans Timmermans, who was a strong contender during the first two days of the summit. But they were left empty-handed in the final distribution of positions. The Nordic countries were sidelined as well, despite Danish and Finnish candidates being among the early names rumored to head the European Commission and the ECB.
Whether the European Parliament will accept these decisions remains to be seen. Von der Leyen should be acceptable to conservative members of the European Parliament. But considering the current fragmentation of the Continental legislature, significant negotiations will probably take place in the coming days to make sure that Continental lawmakers ratify the choices that the governments made.