Germany in the EU after Merkel: A view from the Nordics

With Olaf Scholz as the next Chancellor, all Nordic countries and Germany will have a social democratic leader at their helm. But despite similar political leanings, the more market-liberal and fiscally conservative Nordic countries might diverge from Germany’s traffic-light coalition on important policy issues.

The German election was closely watched all over Northern Europe – as are the coalition negotiations. The entire Nordic region – Denmark, Sweden, Finland, Norway and Iceland[1] – is governed by social democratic prime ministers for the first time in 62 years. On 26 September 2021, Germany’s Social Democrats (SPD) also came first with 25.7% and has started negotiations to form a coalition with the Greens and the Liberals (FDP). If the SPD’s Olaf Scholz enters the Chancellery, all Nordic countries as well as Germany will have a social democratic leader at their helm.

But the jury is still out whether this will lead to a powerful centre-left bloc in the European Council, alongside Spain and Portugal, or divergences of views despite similar political leanings. On important policy issues, the positions of the generally more market-liberal and fiscally conservative Nordic countries might diverge from a German traffic-light coalition.

Before diving into policies, a general note first. Germany is seemingly following the Nordic region in terms of not only the political colour of the next head of government but also how its political system is shaped by fragmentation. The Federal Republic has become more like its neighbours, particularly the Nordic countries, where the prime ministers’ party often obtains (only) around 25% of the vote. Scholz repeatedly mentioned this similarity during his electoral campaign.

The German political parties are, however, still striving for parliamentary majorities in the next governing coalition. Unlike in Nordic countries, minority governments are not considered viable. And despite the increasing fragmentation, the political centre increased its vote share on election day. About 80% supported pro-EU parties. While the far-right Alternative for Germany (AfD) fell by 2 percentage points to around 10%, the Left Party lost half of its voters, ending up at just below 5% of the votes.

All eyes on German economic and defence policy

Looking at substance, economic and fiscal policies are important areas where the North watches Germany’s political developments anxiously. Interestingly, social democratic parties in the North would be satisfied with the fiscally conservative policies of a German governing coalition dominated by Christian Democrats (CDU/CSU) and FDP. Back in September, eight EU finance ministers – from three Nordic EU members, plus Austria, the Czech Republic, Latvia, The Netherlands and Slovakia – publicly expressed their frugal views in a joint letter.

Meanwhile, the fiscal and economic policies of the SPD and Greens tilt towards the more spending-oriented philosophy of French President Emmanuel Macron. In the way of example, Nordic colleagues never shared Scholz’ characterisation of the EU recovery fund as a ‘Hamiltonian moment’. The FDP’s participation in a traffic-light coalition is at least a certain safeguard for fiscal solidity that frugal countries see favourably.

Reforming the Stability and Growth Pact (SGP), or debates on making Next Generation EU, the temporary recovery instrument, permanent will clearly be divisive issues for the German coalition partners. While the Greens especially would like to see the Recovery and Resilience Facility become a permanent mechanism to fund European investment in strategic areas (e.g. green transition), the Liberals reject the idea. The FDP will push for stricter enforcement of the SGP’s fiscal rules – a stance that goes down well in the Nordic capitals.

While the Nordic countries have similar preferences regarding fiscal policies, their views on defence diverge somewhat. Sweden and Finland are EU member states but do not belong to NATO. Denmark has a defence opt-out in the EU but is a NATO member. Norway and Iceland are members of NATO and not part of the EU.

Yet, there are certain defence priorities these countries share. For example, Denmark, Sweden, Finland and Norway have joined the European Intervention Initiative, a French-led format outside of the EU treaties aiming at closer strategic cooperation on defence matters among Europeans. The Nordic countries also value their tied defence partnership with the US, whether through NATO or close bilateral cooperation. Any interpretation of European strategic autonomy as distancing from the US is considered worrisome. While no major changes are expected in the transatlantic orientation of German security and defence, the first moves of a Social Democratic government will be closely watched.

Mixed prospects for social issues, climate and asylum

Other policies offer mixed prospects for German–Nordic alignment. Let us take three policies that were important campaign topics to German voters: social issues, climate change and asylum/migration. On social issues, a European framework for minimum wages is a likely priority of the upcoming French EU Council Presidency and could be underpinned by a national minimum wage per hour of €12 in Germany, for which the SPD and Greens have advocated respectively. A European framework is viewed very cautiously in Denmark and Sweden. A possible Franco–German alignment on minimum wages would thus alienate Nordic social democrats. Any pushes to strengthen the EU’s social pillar – which might, according to the Scandinavian position, weaken those countries’ national social models – have been met with strong resistance in the past.

With respect to the green transition, the Nordic region is generally more advanced than Germany. The Greens’ participation in the next coalition government and an ambitious climate agenda would help close the gap between the two parties. However, nuclear energy could become a possible point of contention with Finland, as Germany is phasing out this technology while Helsinki – as the only Northern capital – joined Paris to push for nuclear energy to be recognised as a green investment.

In the area of asylum and migration, Swedish and German policies are quite aligned. Both countries are popular destinations for asylum seekers. The Danish Social Democrats have adopted a stringent migration policy, and the Finnish government has a very vocal and recently more radical, anti-migration True Finns party in the opposition breathing down their neck. In contrast, the SPD has not changed its pro-migration approach but did not feature migration prominently in its electoral campaign. On asylum and migration, the new governing coalition will likely continue to push for joint European efforts at the EU’s external borders, in administrative procedures and through agreements with third countries. The Nordic neighbours will not oppose this course.

The future of the EU

The rule of law is a topic on which Nordic countries have long criticised Germany’s soft line towards sanctioning rule-of-law challenges in, for instance, Hungary or Poland. The future traffic-light coalition could be tougher than the current grand coalition, where the CDU and CSU long cooperated with the Hungarian Fidesz under the European People’s Party. Germany and the Nordic countries could come to define a new common position on the rule of law – albeit at the expense of potentially increasing tensions inside the EU.

Looking ahead to 2022, the Nordics do not have a big appetite for EU treaty change. Such a push from the Conference on the Future of Europe, which the next German government might eventually support, could divide Germany and the Nordic region. The Greens and FDP explicitly suggested initiating treaty change through the Conference in their election manifestos. Although Nordic countries support the Conference and its citizen engagement, they put even more emphasis on delivering concrete results than many German decision-makers. Besides fundamental issues like democratic values and the rule of law, the Nordics only consider institutional and procedural discussions and steps useful if they facilitate achieving results, such as deepening the Digital Single Market. The Conference’s conclusions will thus have to strike a fine balance between the diverging interests even of like-minded countries like Germany and the Nordics.

In general terms, the Nordic countries are slightly anxious about the potential consequences of Angela Merkel’s departure, whose inclusive style and high reputation have been seen as a stabilising factor on the European stage. Emmanuel Macron, Mario Draghi or even authoritarian leaders like Viktor Orbán might try to fill the power vacuum that she leaves – and this is rather worrying for the Nordics. From their perspective, a rather smooth and quick German government transition is welcome. This would free the way for tackling the EU’s persisting challenges, with a German ally in their corner.

Niklas Helwig is Leading Researcher at the Finnish Institute of International Affairs (FIIA).

Valentin Kreilinger is Senior Researcher at the Swedish Institute for European Policy Studies (SIEPS).

The European Policy Centre continues to contribute to the analysis of Germany’s EU policy at this pivotal moment in German politics, with a series of Commentaries running from July to December 2021. It will feature views from various European capitals on post-Merkel expectations.

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[1] This Commentary mostly focuses on the three Nordic member states of the EU and their views on the incoming German government.