2013 GERMAN POLITICAL DIARY

F R O M A P C O S E X P E R T S

German Elections 2013 IAC Perspectives

For a global perspective on the upcoming elections in Germany, APCOs International Advisory Council (IAC) was asked to share its insights on how the election will affect Europes future; Germanys transatlantic relationship with the United States and Germanys role within Europe. What follows is an article written from the insights of our IAC members.

Impact of German Elections on Europes Future Barring any sudden developments, Chancellor Merkel will likely be re-elected and her party, the CDU/ CSU, will form a grand coalition with the SPD after Germans go to the polls on September 22. The FDP, Merkels current coalition partner, is now wavering around the 5 percent margin of votes necessary to be represented in the new parliament. Its safe to assume, however, that a Merkel-led coalition will continue more or less along the same lines with regards to the transatlantic relationship, as well as on European Union matters. Germany is now by far the most important country in the Eurozone and as a result is facing a correspondinglyformidable challenge to take on more of a leadership role on the global stage. At the same time, some voices in Europe have cautioned against Germany taking too prominent a role. Should Merkel continue as Chancellor, however, one should not anticipate that she will change her present management approach. However, the question remains whether Germanys continued leadership in the EU under Merkel will mean a push to have the EU remain as a collection of individual nation-states, or work to create a more cohesive, ever-closer, union between those member states inside the Eurozone. We believe that Germany will work to avoid the possible departure of the UK from the EU. Working towards a transatlantic free trade zone will serve as a useful tool in achieving this goal, in addition to strengthening the economies of Germany and greater Europe. Moreover, a re-election of Merkel may be positive for the further development of the European Monetary Union (EMU) and the banking union, as this would liberate her from the marginal threat of the anti-Euro party with its undeclared, but real, pressure on the constitutional court. Relationships With Emerging Economies Preparing for a more independent role outside the EU is unlikely to be in the strategic interests of Germany at this time. It benefits greatly as the leading member state in the Eurozone, and its strategic interests are better served by strengthening this role. However, this does not preclude Germany from building closer ties with countries outside the EU, notably Russia and China, in the absence of a real unified EU foreign policy. Pursuing such relationships will allow Germany to diversify its market export base, minimizing the risk of shocks to the German economy. Of course, this means continued expansion into Asia, but pursuing a strategy of only expanding in China will not suffice. Which other Asian markets will become the focus of this effort is yet to be seen. In addition, the emerging economies in the Middle East, already major trade partners for German firms, will remain high on the agenda for Germanys new government.

2013 GERMAN POLITICAL DIARY

F R O M A P C O S E X P E R T S

The Future of the Transatlantic Relationship With the United States Transatlantic relations will remain essential for Germany. Since Chancellor Merkel has been an advocate of the free trade zone proposed under the Transatlantic Trade and Investment Partnership (TTIP), it is fair to assume that if she is re-elected, she will seek to drive the negotiations and bring them to a conclusion by 2014. Given the protectionist tendencies among some EU countries, e.g. France, the negotiations will inevitably have roadblocks along the way. Furthermore, the negotiations have already been overshadowed by the Snowden affair, causing concern on the need to balance issues of privacy and security; not to mention the risks of industrial espionage. Beyond the technological dimension, the Snowden affair has revealed that democracies lack mechanisms to control information flows as they once did, while having greater power to monitor individual information than ever before. Given the cultural differences resulting in different attitudes on this issue, there is an urgent need for a transatlantic dialogue aimed at finding a common ground on protecting individuals privacy while providing greater security. Whether Chancellor Merkel will take a lead on this issue remains to be seen. Beyond these elements, there arent presently any truly substantive objections from German in the recently-begun TTIP negotiations. Germanys Post-Election Role in Europe No matter which coalition emerges after the election, the future of the Eurozone will have to be addressed on a variety of levels, both as a crisis management issue and at the more fundamental level - namely the question of the end game for the integration process. The two big parties recognize the importance of the Eurozone for the German economy and, therefore, Germany will not shy away from taking all measures to rescue the Eurozone. Does this mean that Greece will have to stay as member of the Eurozone at all costs? Not necessarily. But it does mean that Italy, Spain, and above all France will have to stay - even if the German taxpayers will have to dig deeper into their pockets. Relieved of the election pressure, and the need to protect German tax receipts, one could assume that there may be scope for more flexibility regarding the steps that have to be taken on banking union and the additional measures that are currently being considered. Will Germany advocate treaty changes? This cannot be ruled out although clearly significant difficulties exist with this approach. Will a German government led by Merkel go for the mutualization of debts? A coalition including by Social Democrats might be openly disposed towards such an idea. As to the long term final destination of the European Union, many hope that Germany will take the lead in the debate. Regardless of the outcome of the upcoming election, one thing is certain across all of these issues. For the foreseeable future, all eyes will look to Berlin as much as Brussels when determining the direction of Europes economic future.

2013 GERMAN POLITICAL DIARY

F R O M A P C O S E X P E R T S

APCO Worldwides International Advisory Council (IAC) and its three subgroups comprise more than 90 recognized global leaders, including: former elected politicians; leaders of business and industry; academics at leading universities; world-class journalists and editors; NGO and nonprofit pioneers; diplomats; and policy experts. Each member offers clients invaluable real-world knowledge; they are individuals who understand the complex issues clients face because they have encountered similar opportunities and challenges and successfully conquered them in their own careers. Clients can get counsel from individual members, or a select group of members with varying perspectives, to obtain robust counsel that can help clients make the right decisions.

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For more information on APCOs International Advisory Council and its three subgroups, please contact: Brent Crane associate director APCO Worldwide 700 12th Street, N.W., Suite 800 Washington, D.C. 20005 - U.S.A. Tel: +1.202.778.1021 Email: bcrane@apcoworldwide.com For more information on the German election campaigns or APCOs services in Germany, please contact: Maximilian Knoth consultant APCO Worldwide Poppelsdorfer Allee 114 53115 Bonn - Germany Tel: +49 228.604.8514 Email: mknoth@apcoworldwide.com

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