It was billed by some as an epic clash of competing world views. Angela Merkel spoke in Davos on Wednesday, the same day as French President Emmanuel Macron, and two days before a much-anticipated appearance by US President Donald Trump.
Their exchange of ideas can only be healthy, says Klaus Schwab, the German founder of the World Economic Forum, which hosts the annual gathering. “There are certainly questions about [Trump’s] policies that we will challenge him on,” Mr. Schwab told Handelsblatt. “My hope is that the participation of the president will help achieve progress here.”
But while Mr. Macron might be tempted to take the bait – and take the fight to the US president – Angela Merkel is staying meek. The German chancellor, who is attending the annual conference for the first time since 2015, chose to keep a lower profile, to the dismay of some of her international colleagues.
Despite globalization being under attack and the United States aspiring to a more protectionist trade policy, Germany seems to have a hard time acknowledging a leadership role when it comes to defending free trade, says Robert Zoellick, the former World Bank president and US trade representative under George W Bush. “Germany is dominant, but it doesn’t want to dominate,” Mr. Zoellick told Handelsblatt.
Multilateralism is becoming a bad word. We have to decide whether we want to dictate or be dictated to. Sigmar Gabriel, Germany's acting foreign minister
Berlin kept expectations in check for the Davos gathering. Ms. Merkel planned to leave the same day she arrived, which means no meeting with Mr. Trump. Her appearance came on a day where the focus was on Europe, rather than on globalization or free trade.
Her speech largely reflected that focus, dwelling more on Europe and the challenges posed by a digital economy than on Trump. But she did make one thing clear: “We think that isolationism will not get us anywhere and that protectionism is not the right answer.” Today’s challenges, she argued, were better faced by multilateral solutions than unilateral ones.
Europe is an important topic in its own right. Many are waiting for Germany to lay out its own plans for how to reform the European Union, after France’s Mr. Macron presented his own ideas in October. Ms. Merkel has been hamstrung by ongoing coalition talks ever since an uncertain election result last September. All the while, policymakers and business leaders are prodding Germany and France to once again take the lead in furthering Europe’s integration.
“When France and Germany are doing well, Europe is doing well,” Deutsche Post DHL CEO Frank Appel, one of dozens of German business leaders joining Ms. Merkel in Davos, said Tuesday on the first day of the annual gathering of elites. Mr. Appel also praised the reforms of Mr. Macron in France.
Mr. Schwab, who no longer resides in Germany, said he has been “observing with concern that Germany doesn’t have a government capable of decisive action – also because Europe stands at a decisive crossroads between Brexit and the proposals of France’s President Macron for reviving the community.”
Though Ms. Merkel wasn’t yet prepared to lay out a detailed plan for European reform, she focused more on the need for Europe to speak with one voice. That includes a common defense policy (where there has been some progress) and a common foreign and immigration policy (where there’s been far less progress).
It’s not as if Germany doesn’t have anything to say on the matter of global trade – long a sore spot for a country that has posted the highest current-account surplus in the world for two years in a row. But Germany’s acting foreign minister, Sigmar Gabriel, says the two challenges are related: For Europe to project self-confidence on the global stage, it has to get its own house in order first.
“With liberal values coming under threat elsewhere and ‘alternative facts’ dictating debates, one thing should be clear to everyone here in Europe: With a weak Europe, we will lose the fight over our values and influence,” Mr. Gabriel, who has been far more outspoken on Trump than the chancellor in recent months, told Handelsblatt. “That is why I am pushing so hard for us to reform Europe. I don’t want Europe to be a small fish in a tank full of sharks. We need a European game plan.”
That includes “clearly defining our interests, and acting more decisively to defend them – especially against the United States,” Mr. Gabriel added. “Multilateralism is becoming a bad word. In this uncomfortable situation, we have to decide whether we want to dictate or be dictated to.”
For the moment, though, Europe has largely left others to dictate terms. Indian Prime Minister Narendra Modi set the stage with his appearance in Davos on Tuesday, challenging Trump by calling the world a “family” and challenging other leaders not to give up on shaping a globalization that helps emerging markets like India’s. Canada's Justin Trudeau meanwhile announced a free-trade deal with Asia-Pacific nations. Their speeches followed in the footsteps of China’s President Xi Jinping, who stole the limelight last year with his own full-throated defense of free trade.
Europe’s absence from this debate is dangerous in part because countries like China don’t necessarily walk the walk. The “reality is different” in China, where direct investment and market access to the domestic market remains limited, said Nikolas Stihl, chairman of the German manufacturer of the same last name. Globalization has a bad name in many parts of Europe, too, he noted, which makes it all the more important for Mr. Macron and Ms. Merkel to develop a “European definition of free trade and sovereignty.”
While she hasn’t always shied away from tough speeches, Ms. Merkel tends to prefer to let her actions do the talking. In Davos, that included a focus on issues less in the global headlines, including building a “compact with Africa” to develop the continent’s economy. She also urged business leaders to help make their economies fit for the digital age – a challenge where she said there has been little “sense of urgency” in Europe.
The German chancellor certainly had some wind in her sails when she appeared in Davos. Germany’s economy is humming along at an impressive clip, while the political clouds that Mr. Schwab referenced are showing signs of clearing. On Sunday, Ms. Merkel’s rival Social Democrats agreed to start formal talks toward joining a governing coalition. Add to that a new ranking of countries’ living standards by the World Economic Forum putting Germany top among the G7 industrialized nations, and 12th overall (see graphic above).
Contrast that with US President Trump, who travels to Davos as an anti-globalist, just days after a government shutdown and imposing tariffs on solar panels that mark the start of a growing fight with China over trade policy. On the WEF’s Inclusive Development Index, the United States ranked 5th among G7 countries and 23rd overall among industrialized nations.
And yet it’s pretty clear which of these two leaders will be grabbing the headlines by the end of this week. That might be just fine with Angela Merkel.
Christopher Cermak is an editor with Handelsblatt Global in Berlin, covering economics, politics and finance. Moritz Koch, Thomas Tuma and Torsten Riecke of Handelsblatt contributed to this story. To contact the authors: [email protected]
This story originally ran Tuesday and was updated with Angela Merkel's speech on Wednesday at 3:55 pm Berlin time.