In theory it sounds promising. Angela Merkel, concerned that Brexit will mean the departure of one of the EU’s most reliable free-marketeers, is rallying the union’s economic liberals to stand up for those principles even after the UK has left.
In practice it is more complicated. The German chancellor’s initiative seems to be predicated on the idea that there is a definable spectrum from economically liberal to interventionist, and that Germany and its mainly northern European allies stand on the free-market side.
Yet in fiscal and social policy, the second of which often affects freedom of movement and the single market, Germany and northern Europe frequently support policies that restrict growth rather than encourage it. As for trade, the area that has the most clearly definable spectrum between free markets and statism, Berlin needs to reverse its recent movement towards the latter end if it is to have much credibility.
There is no doubt the departure of the UK is a blow to those who want more market and less government intervention in the EU. Along with the Nordic countries, Britain has reliably supported freer trade and lighter regulation. Without it, Germany will feel itself somewhat isolated: the EU’s other big economies, France and Italy, often argue against liberalisation initiatives coming out of Brussels.
Yet Germany needs to be clear exactly what it is asking for. It seems to have identified fiscal stringency as part of its definition of being economically liberal. This is a misnomer. Judicious countercyclical fiscal policy at a time of weak growth and extremely low interest rates is a wise policy, not a reckless one. Endlessly pressing the European Commission to enforce budget deficit rules against EU member states - and pushing for counterproductive tighter fiscal policy in the Greece bailout - is not a progressive move.
On trade issues, Germany has traditionally been the swing voter among member states, with the UK, the Nordics and the Baltics at one end of the see-saw and the Mediterranean countries at the other. Yet Germany has been edging towards the protectionist end of late.
Last year it teamed up with France to argue for bigger retaliatory tariffs in dumped or subsidised imports from countries like China. Berlin has also largely failed to counter criticism of the Transatlantic Trade and Investment Partnership from German campaigners, preferring to hide behind the European Commission.
As for liberalisation and the single market, Germany has correctly been criticised by other EU member states for failing to deregulate key parts of its own economy, notably in the service sector. It has also sided with other rich western European countries in the debate over the Posted Workers Directive, which enables employees sent from one EU country to another by their companies to retain the working conditions of their original country rather than their destination economy. The directive splits the EU along east-west rather than north-south lines, with eastern European countries wanting to ease labour mobility to help their citizens find jobs in richer economies.
Ms Merkel is right to identify Britain’s forthcoming departure from the EU as a blow to liberal economics.
The UK was always one of the most enthusiastic countries for completing the single market, particularly in services, and in the bloc’s freedom to trade. But misguidedly pursuing fiscal stringency in the eurozone, and failing to correct the flaws in Germany’s own domestic and international liberalisation efforts, will put her in an intrinsically weak position to fill that gap.
