Germany is set to take over the EU presidency amid one of the biggest crises in its history. The slogan for the rotating six-month presidency which Germany's Chancellor Angela Merkel has unveiled at the Bundestag - Make Europe Strong Again - has a familiar ring to it. But she is well aware of the challenges facing the continent and seems ready - in the last year of her term in office - to take up the responsibility of outlining Europe's future amid the coronavirus crisis.

In July, at the European Council summit, tough talks are expected on issues which are key for the future of the EU – the outline of Europe’s recovery plan and the new seven-year EU budget.

Join me as I talk with Matthew Karnitschnig, the Berlin-based chief Europe correspondent for the American news website Politico, as we discuss the challenging year ahead, German strategy, about Europe and the multi-polar world, and the legacy of Angela Merkel.

The Croatian presidency ended in the world of corona, so basically we didn’t see much of it, but from July 1 Germany is taking over the EU presidency, with really difficult subjects to solve ahead of us, it’s basically, what people say, if not the worst crisis in the history of the European Union, it is certainly one of the biggest crises. You wrote a great piece, ahead of that German presidency in Politico – it’s called What Merkel Wants. So, you basically start your article with a sentence in which you say that Europe’s “reluctant hegemon” is reluctant no more. Why?

Well for a number of years in Europe a lot of people have been frustrated that Germany has not taken a more active role in leading Europe, and this has historic reasons – Germany has always been somewhat reluctant to put its own interests ahead of everyone else’s, at least in public. When they do it, it’s usually behind the scenes more. But we’ve gotten into a situation now where Germany really is the only power in Europe that has the authority and the political capital, and also the economic might, to really step in here and take charge. And it happens, now that the crisis has hit, that Germany is also taking over the presidency.

So, this is a good opportunity for them to do so, but I think that if Germany was to preserve Europe – the European Union – it really has no choice, and I think it is also looking at its self interest here now, and this is really the change – that Germany understands that it is the country that has benefited most from European integration in a number of ways. If we look at just the number of people who have moved to Germany from other parts of Europe, including from your own country, Croatia, a lot of very qualified people come to Germany to keep the German economy running.

And these are things that I think the politicians have always understood, but the population in Germany hasn’t appreciated to a degree, and I think this is also a change that we’re seeing – the politicians now, from Merkel on down, are trying to explain to Germans that the European Union isn’t just about peace and harmony – it’s also in Germany’s core economic interests.

One of the biggest obstacles, after the corona crisis, is that we have these tough negotiations, we can say, at European Council concerning the Next Generation EU economic recovery post-corona plan, and of course the next seven-year budget of the annual financial framework. We know what were the divisions between let’s say east and west, north and south, between frugal and Visegrad countries, and so-called centre. And we know the doubts, their doubts about conditionality, their doubts about the criteria of this Next Generation EU, concerning, you know, grants and loans. But what do you think Merkel will do, or Merkel and Macron, we saw Macron going to The Hague several days ago, to meet Dutch Prime Minister, Rutte… So what can we expect, as of July?

Well, I think that they’re going to do everything they can to get a deal at this special summit that they’ve called, of the European Council, in mid-July. I understand that they are not certain that they will be able to get a deal there, and if they don’t there will have to be another summit. But I think that the pressure they’re going to use here is the economic distress in countries like Italy, Spain, and so forth, and these are countries that really need this money now so you can’t wait and keep pushing it off forever.

And it’s also important to remember that if you talk about the frugals, particularly the Netherlands, particularly Austria, but also Denmark… You know, these are countries that are very closely integrated into the German economy itself, they really rely on Germany, so Germany can exert a lot of pressure here, and this is what I mean about Germany taking more of a leading role and maybe not being as reluctant as it was in the past to offend others or to strong-arm them to force them into doing things that it wants. I think that we might see that in the coming months.

Talking about German presidency, the other day Ms Merkel presented the plan, and the content of its presidency in the Bundestag. What struck me as really interesting was the slogan – Make Europe Strong Again. So, looking at the world of geopolitics that we’ve been living in for quite some time now and the influences we talked about, first of all, you know, Russia, China, and on the other side this cold relation that Europe had all the time with the Trump administration… How will this resonate in the year where we also have, you know, our own big issues to solve, and on the other hand, we do have the US elections?

It is sort of an ironic title, and I wonder if the Germans are aware of how ironic it is, they’re not always the best at understanding irony. But I would say that part of the story as well is that the Germans, and the European Union in general, I would say, are beginning to understand that they can’t rely on the United States forever to the degree that they have in the past.

There’s a lot of tension, in particular between Germany and the US, over military matters, as we know, and I think this is another reason that’s pushing Germany to step forward here. The old days where the US would always step in and bail Europe out, or take a lead in a European crisis, whether it was the Balkan Wars of the 1990s, or many times before that, are over.

And whether Trump wins or not, it really seems that there is a shift here in the United States away from Europe. You might see Biden come back and play nice with the Europeans and talk about how important the Alliance is, but overall I think that there’s an expectation in the United States that the Europeans do more to deal with their own issues because the United States is going to be turning its focus more towards Asia, more towards dealing with China.

And I think that Merkel has also started to understand this. So there is, as some people are saying, that there’s been a “widening of the Atlantic” here. And, you know, maybe in the long term that will be good for Europe, you know, it needs to maybe emancipate itself more from the United States, and that also gives the Europeans maybe more autonomy in dealing with partners like China, who are also rivals, obviously, but also Russia.

You mentioned several things, and basically this crisis, just, you know, opened them up. So, the construct of Europe is as it is, and the construct of the world what we’re seeing now is as it is. So basically we’re now talking through this recovery plan or some kind of fast, economical transition for all of Europe. Okay, Germany, it has a strong economy, but you have a lot of countries that need to catch up with this transition, and of course corona crisis deteriorated the economies, you mentioned Spain and Italy, but we see a similar situation, for example, in Croatia, in a small country in a way… So, we have China from the other side, basically, penetrating Europe through the 17+1 Initiative and One Belt, One Road… One of the priorities of German presidency was supposed to be this huge China-EU trade summit which is basically, you know, I think postponed now. We saw the other day the discussion that Charles Michel and Ursula von der Leyen had with Chinese President Xi. So how do you think that Europe – in these fractures that it has now and needs to act quickly – will handle its own economy in the future, and relationship with China?

Well I think there’s been a lot of, you know, aggressive rhetoric towards China recently, and I think we’re gonna have to watch though and see what Europe does really in terms of actions, and I think that actions towards China might be somewhat less aggressive than the rhetoric that we’ve heard recently. Obviously, when China cracks down on democracy in Hong Kong and, you know, operates these quasi-concentration camps for the Muslim minority there – this is not something that Europeans can ignore or pretend isn’t happening.

At the same time, it’s worth remembering how important China is to the European economy, and especially to the German economy. And I think, you know, one way to think about it is that all of these economies are interconnected to a great degree – the European economies, smaller countries, you know, Croatia, as well, very connected to what’s going on in Germany, ultimately, depends on the tourism from Germany – all of this is very connected and Germany really needs China.

So, I think that you’re going to hear some negative rhetoric out of Berlin towards China, but behind the scenes they’re going to be looking for ways I think to improve business relations, especially, again, as the relationship with the United States is also quite difficult. The United States is Germany’s largest trading partner, for example, so you know you can’t sort of make the world into what you want when you’re trading with people and trying to keep your economy afloat, you have to deal with it as it is. And I think that certainly Merkel understands that, and I think we can maybe see a slightly more pragmatic policy towards China.

That said, I think people have also woken up to the fact that China is not this far away developing nation that Europeans don’t need to worry about. And they have slowly, but very deliberately, built quite a presence in Europe. As you mentioned, they bought the port of Piraeus for example, in Greece, and at the time they were the only bidders for this port which is a crucial trading hub in the EU. So it’s quite extraordinary what they’ve managed to do. And they’re building this corridor up through the Balkans, and I don’t think that Europeans have really understood the long-term ramifications of that.

But it’s good that they’re waking up to it. At the same time, I think that they recognise, they’re going to need to somehow have a good trading relationship with China going forward.

The word of the era, or the word of the year because of corona, in a sense, is “security” – in all its content that we can have: now we have, you know, health security, food security, supply security, future security – and we talked for a lot of time about, you know, need for this, let’s say, European army. But now we have another concept of security which is basically human security, in a sense that is connected with things with climate, with health, with these kind of unpredictable things such as this virus happening. Do you think that in this strategy and recovery plan that this is precisely defined, and maybe some countries in Europe still don’t understand in which direction we all need to go to basically, you know, keep Europe from collapsing?

Well I think this talk about security is quite interesting, because it seems very important at the moment, as we’re in the middle of this crisis. I worry though that once the crisis passes that there’ll be less awareness of how important it is to have domestic production or production within the EU, of certain pharmaceuticals – there was a lot of consternation about the fact that nobody in Europe seems to produce masks anymore at the beginning of this. But there are reasons for that and the reasons were that you couldn’t really turn a profit in Europe if you had a factory making masks, because the costs are too high.

So I think that there’s going to be a reckoning over these issues after the crisis, and I would be surprised if Europeans end up bringing back production, for example, of all of these things that they say are absolutely crucial to European security. You might see stockpiles being established here and there, but I wouldn’t underestimate people’s tendency to forget things once the crisis passes.

But, generally, security – especially cyber security – I think is going to be something that the European Union is going to have to get its hands around. If you look at what the Chinese are doing, if you look at what the Russians are doing, and Europe is at a big advantage here to be honest. Because there are 27 countries here, and, you know, they all have their own interests, there are some countries who are more willing to cooperate with China, say, than others. So, it’s much harder to keep secrets, I think, on these types of issues in Europe with 27 democracies than it is in a place like Russia or China. So Europe is always going to be exposed to a degree, I think, on these security matters.

And talking about cyber security, we also had, with the pandemic, we have also had a, kind of, as they call it in Brussels now, infodemic, in terms of “fake news,” and disinformation being disseminated all over social media, and it’s really hard, in a sense, to fight against it, because it’s gaining ground, and different political groups in Europe are using it, especially right-wing groups. Some say crisis is an opportunity – but can this crisis also be some kind of, you know, trigger, for another wave of populism or a rise of right-wing ideology?

Well, you would think so, and before the crisis, I would have said yes, definitely. But I think we’ve seen something interesting happen here, that in the midst of the crisis that support for populists in many countries has actually fallen. Because I think people realise that they need actual expertise, that they need people who know what they’re talking about, and they need to rely on the government, and they want the government to function.

And I think in a lot of places they’re seeing that the government has functioned. If you look at Germany, for example, where support for the far right party AfD has fallen to under 10 percent – it’s extraordinary, and I don’t think that many people would have predicted that a year ago.

So I think that it has been an opportunity for mainstream politicians in many countries to show that they can actually deal with crises, that they are reliable, and that a lot of the criticisms of the populists who often portray these complicated issues as being very simple and having simple solutions, you know, that that is not really the course that works.

And certainly, again, if you look at what has gone on in countries that are led by populists including the United States, or the United Kingdom – they haven’t really been very convincing in their approach to the crisis, I think most people would say. So I think this has prompted maybe many Europeans to rethink their views towards the populists and also their trust in their own government.

The trigger in the sense of this wave of rising populist and right-wing was this 2015 and the so-called migration crisis. What stands in front of the EU in the future is its new common migration policy. We’ve heard commissioner Ylva Johansson the other day saying it had to be postponed because of the emergency situation of the pandemic, and the economy. Will Europe be strong enough, as Merkel says, to understand these challenges? We know that we have, you know, common strategy for Africa, we know that we still have, you know, unsolved issues in our eastern neighbourhood from Ukraine to Syria, in a sense. So, how do you think that Europe can be on one hand geo-strategically strong, and on the other hand understand the challenge, basically, that migration has for the future of the world with all that it has inside itself as a process?

Well, I do think that the crisis is probably going to lead to less migration then there already was, I think it has already been turned down quite a bit. And I think that there is an understanding, especially in Northern Europe, in Germany, and other countries, which have been the destination for most of these migrants, that bringing in more migrants now is only going to create new political problems for them. So they’ve, I think, learned from that experience.

The crisis itself, interesting thing about it and maybe different to the migration crisis, is that this health crisis affects every country relatively equally, so it’s easy to compare your government and its handling of it to, you know, your neighbouring countries or countries on the other side of Europe. So it is a bit of an equaliser, and I think that that has helped bolster maybe the reputation of certain leaders in Europe, and maybe given them the credibility to say, you know, this is the course that we as a united EU need to pursue going forward.

I don’t know if Europe will be able to resolve all of these issues, to be honest, because they are extremely difficult. Europe is still divided in many different ways. But the extraordinary thing that I think has happened in recent weeks has been this decision by Germany to say, together with France, that they will support this €500 billion fund financed through bonds. And if that actually goes through that would be a real turning point, I think, in the way that the EU operates, and show that the European Union for all of its flaws does have a future.

And I think many people have doubted that for a long time, and there have been plenty of reasons to doubt that. Now I don’t know if this fund itself is going to solve all the problems that Italy faces and that other countries face. But it is a step in a new direction towards also, I think, addressing the kinds of challenges that you’re talking about on the geo-strategic level.

And of course, what you said, that it was maybe a historical thing because beside this agreement of Berlin and Paris, in a sense, we now see the message from the Commission, about the structure of this fund and basically the thing that, in a sense, European Commission is becoming an entity that will, you know, go on the markets and take the money. Can we talk in the future about – okay, some call it “stronger Europe,” but a more federal Europe? Because it was a large part of discussion before the crisis. Is this may be the first sign of it?

Well that’s obviously a gradual process, and I think this is why this is a turning point. I don’t think that you’re going to see a federal Europe tomorrow, or even next year, but now they’re talking about looking for ways to raise money for the EU, that the EU has its own, effectively, tax-raising powers which would also be a real turning point, that the EU doesn’t have to rely just on money coming from the member states.

At the moment, the EU is basically not allowed to go into debt, in terms of the budget, it has to get the money from all of the member states to pay out the funds from this seven-year budget that it operates under. And if it had its own ability to raise taxes – and they’re talking about things like plastic tax, or carbon tax, and these types of things – that would put the EU really on a more independent stage than it has been up to now, and less reliable, on the member states. And that would be maybe the first step towards some kind of a more federal structure.

We, just at the end of Croatian presidency, had this first, let’s call it a draft, about the Conference on the Future of Europe, which is very interesting, as we remember the last one, in 2000-03 led by Giscard d’Estaing didn’t end well – but we got, you know, years and years later, the Lisbon Treaty. In a sense, in this draft we see that they’re not talking about treaty change. But concerning all the things that you mentioned, do you think that after this conference on the future of Europe will be over, in the next two or three years or they say maybe a bit longer – that Europe will come to that conclusion? Because when I hear Van der Leyen say that we need to hear the people, maybe people, I don’t know, we’ll say something else, and who will be the ones who will basically lead this process to have some structure and meaning at the end?

I mean I think Europe comes out of this economic crisis that it is in now – it’s not just a health crisis but an economic crisis – the pressure to move towards a full-on federalist structure will lift to a degree. I’m pretty skeptical that you’re going to see something like a real United States of Europe any time soon.

I think it has to be you know something maybe more subtle, where the Commission has certain tax raising powers, and maybe has somewhat more authority behind the scenes than it does now on various fronts. But my impression is that most Europeans, especially people in countries that were behind the Iron Curtain, that they really like having their sovereignty and they haven’t had their sovereignty as a nation for that long, at the end of the day, so they’re very reluctant to give it up.

And I think this is sort of a dynamic that you see in places like Czech Republic or Poland or Hungary. They like the European Union, because it benefits them in many ways, but they don’t want to hand all of their national sovereignty over to the EU. And I don’t really see that changing in the short-to-medium term, to be honest.

So I think that there’ll be a lot of talk in these discussions about Europe in the coming years as we’ve had, and hopefully they’ll find ways to maybe bring Europe into a more slightly more federalist structure without being too obvious about it. But it’s going to be a hard sell in a lot of countries.

And talking about this, there is one interesting thing in this EU recovery plan, talking of course about future politics – health, green digital – but there’s also the conditionality of basically respecting the rule of law as the basis of what European Union is. We know what has happened in cases of Hungary and Poland before, it’s really difficult to act by the Lisbon Treaty towards the countries – but this is basically, this conditionality, either you’re in the club and respect the rule of law or you decide something else, but all the countries are at the moment in this situation in which they cannot do anything else because we are all in this deep, deep crisis with long-term consequences. So how do you see this message basically that this commission sent, and I think, that Germany and France have stood behind?

Yeah that’s right, and I think this is again one of the big challenges that the EU faces – how do you deal with these questions in Poland and Hungary regarding the rule of law? And here again, Germany can play a very important role, because those countries in particular are completely dependent upon the German economy. And up to now you haven’t seen Germany really use that.

I mean if you look for example at Poland, about 30 percent of Polish exports go into Germany, a big chunk of the Polish industrial economy is owned by German companies. If you look at employment in Hungary, the carmakers that have factories there, it’s a huge part of the Hungarian economy. And so I think that you might see Germany using its influence in those countries a little bit more aggressively to point out to Viktor Orban and President Duda Kaczynski in Poland, that, you know, this cannot continue in the way that it has.

But their hands, ultimately in Brussels, I think, are tied more or less, because the treaties require countries to fulfil all of these requirements regarding the rule of law before they get in, as Croatians probably know very well – but once you’re in, you can pretty much do whatever you want. And they’re trying to tie some conditionality now between the budget and fulfilling these rules going forward, but that’s going to be very difficult because a lot of this will require unanimity. So you only need one country to support you – and Poland has Hungary and Hungary has Poland. And so it’s not going to happen.

So I think you need to have maybe, you know, this pressure behind the scenes from Berlin and maybe from Paris to push things forward. But at the end of the day, it’s going to be more important for the EU and for Germany to just keep the entire thing together, and so they might just have to kind of bite their tongue and continue to accept the fact that some members of the EU are not living up to these standards.

And for the end, I want to get back on the beginning of the, the name and legacy of Angela Merkel. We know how much of a role she played in recent European history, as presidents and prime ministers changed, she was there as a constant. The question is now who is going to succeed her, and another question is what is going on within the CDU? Because we know that there are, you know, still people who are on her side, but there is a lot of maybe a little bit right-wing part of the party that is trying to go in the other direction. So how do you see from Berlin, what should we expect, because we know that next year she’ll be out of the picture?

Yeah that’s right, and I think, you know, as we’ve seen over the past year, a lot can change in a year. The CDU is now at about 40 percent in the polling, which is an extraordinary number when you think about it for somebody who has been in power for 15 years as she has, she seems to be more popular in Germany now than ever and has really benefited from this crisis.

That’s going to make it very difficult I think for her successor, whoever it is. And this might be one of the mistakes that Merkel made early on in not really designating a successor or building someone up to take over from her. She tried with Annegret Kramp-Karrenbauer, the woman who’s now defence minister, and that didn’t didn’t work out. And so, just as Corona hit, the CDU was in the midst of a new leadership contest and they’ve had to put that on hold. And there’s three or four candidates there and it’s really not clear at this stage who that is going to be.

But whoever it is, I think, will have difficulty maintaining the broad coalition in German society that Merkel did. So I think that, you know, this is another sort of big question mark over the future of Germany. You know, Germans like continuity – which is one reason that Merkel has been there for so long – but change is coming and it’s not going to be that long before we see her step aside.

This will have, I think, great implications also for the EU because, as you said, she is the longest serving leader in the European Council, I believe, and aside from Germany’s size and economic power and support, this gives the country a lot of influence. Because, you know, she’s seen it all, she’s been involved directly in all of these crises directly, and it’s very difficult to replace that. And none of the people who are candidates now have anywhere near the kind of experience that she has on those fronts.

That said, they’re all, you know, dedicated Europeans, so I don’t think we’re going to see a huge change in policy. But given the crises that Europe is facing at the moment and is likely to face in the coming years, it could be a somewhat rocky road ahead.