The UK will have to “live with the consequences” of Boris Johnson ditching Theresa May’s plan to maintain close economic ties with the EU after Brexit, Angela Merkel has said, hardening her tone over the prospect of a no-deal scenario at the end of the year.
After more than three years in which the German chancellor repeatedly emphasised her openness to a deal that would maintain the UK’s current flows of trade with the bloc, she suggested the door leading to such a compromise had now closed.
“We need to let go of the idea that it is for us to define what Britain should want,” Merkel said in a wide-ranging interview with a small group of European newspapers, including the Guardian. “That is for Britain to define – and we, the EU27, will respond appropriately.”
Speaking days before Germany takes over the EU rotating presidency, Merkel made clear that her priority was instead to push through a pandemic rescue plan to stop Europe’s economy sliding into the worst slump since the 1930s.
Coming in the week of the fourth anniversary of the Brexit referendum, the change of rhetoric from within the chancellory also appears to quash renewed speculation in the British press that Merkel could seek to soften Brussel’s red lines to secure a last-minute deal.
“With Prime Minister Boris Johnson, the British government wants to define for itself what relationship it will have with us after the country leaves,” Merkel said. “It will then have to live with the consequences, of course, that is to say with a less closely interconnected economy.
“If Britain does not want to have rules on the environment and the labour market or social standards that compare with those of the EU, our relations will be less close. That will mean it does not want standards to go on developing along parallel lines.”
Negotiations between the UK and EU are in deadlock over whether Britain needs to tie itself to the EU’s developing state aid rules and common environmental, social and labour standards in return for a zero-tariff trade deal.
Merkel’s ambassador in Brussels, Michael Clauss, recently said he expected Brexit to command most of the political attention in the autumn, fanning British hopes that Germany’s six-month EU council presidency could push the negotiations back to the top of the political agenda before the extension period ends on 31 December.
But in the interview, held around the enormous circular conference table inside Merkel’s chancellory in order to meet physical distancing rules, the German leader vowed to spend most of her political energy during the presidency on rallying EU member states around a joint economic response to “a challenge of unprecedented dimensions” posed by the Covid-19 pandemic.
The coronavirus crisis, which comes in the 15th and final full year of Merkel’s stint at the top of German politics, has not just led to a remarkable upswing for her personal approval ratings, but also an extraordinary pivot away from her conservative party’s deeply ingrained fiscal restraint.
On 18 May, Merkel surprised even party colleagues in her Christian Democratic Union (CDU) by teaming up with Emmanuel Macron to push for a European recovery fund worth €500bn (£448bn).
In front of journalists from the Europa group of newspapers, including the Guardian, Germany’s Süddeutsche Zeitung, France’s Le Monde, Spain’s La Vanguardia, Italy’s La Stampa and Poland’s Polityka, Merkel said Germany was right to be prepared for “an extraordinary act of solidarity”.
“In a crisis of this magnitude, each and every one of us is expected to do what needs to be done. What needs to be done in this case is something extraordinary. Germany had a low debt ratio and can afford, in this extraordinary situation, to take on some more debt. It is also very important to us to keep the programme within the bounds of the European treaties. We have found a way to do that.”
Her goal, Merkel said, was for the EU’s response to eventually match the multilateral response to the 2008 financial crisis. “These days, we have to do all we can to stop ourselves collapsing into protectionism. If Europe wants to be heard, then it needs to set a good example.”
Merkel and Macron’s initiative faces resistance from Austria, Sweden, Denmark and the Netherlands. Even if they can sway the “frugal four”, in the coming months there is likely to be a scramble for access to recovery package funds.
“Because of the different degrees of damage inflicted by the pandemic, the distribution has to be based on a different formula from the one applied to normal European budgets,” said Merkel. “I hope that this argument will be accepted. This unusual challenge requires us to take an unusual path.
“For countries which are already heavily in debt, more borrowing makes less sense than grants. I am working to convince the remaining countries which have so far been in favour of loans but against grants.”
Some suggest Merkel’s seeming reinvention from arch-austerian to big spender has been forced by the German constitutional court’s ruling on 5 May, questioning the legality of the European Central Bank’s bond-buying programme, and thus the entirety of the EU’s legal regime.
“Without a doubt, European law has precedence over national law – but that does not tell us where the realm of European law begins and ends,” said Merkel. “The essence of the European Union lies in the member states transferring powers. In the borderland between the spheres of jurisdiction of national and European law, friction can occur if the European level defines its limits more broadly than, for example, the German Parliament does. That’s what we are seeing in the ECB case.”
While the ruling of the constitutional court in Karlsruhe represented “a conflict”, Merkel said, it did not fundamentally challenge the legal order of the EU: “That is the nature of the beast, since a nation state will always be able to lay claim to particular powers unless all powers are transferred to the European institutions, which is surely not going to happen.”