(Bloomberg) -- European leaders welcomed the prospect of an early election in Germany as a way to break the impasse in Berlin that could help their common project to advance.
Leaders are gathering Thursday in Budapest for two days of talks in the shadow of Donald Trump’s dramatic election victory in the US and the shock collapse of the German coalition overnight.
German Chancellor Olaf Scholz is expected to arrive late at the meeting after he fired his finance minister on Wednesday night and set his sights on a snap vote early next year.
Bringing forward the electoral timetable in Germany — where federal elections were due to be held in September next year — could help the EU to forge a strategy to deal with an increasingly hostile world, symbolized by the return of Trump to the White House.
Scholz has been unwilling or unable to support major European initiatives, in part because of Finance Minister Christian Lindner’s insistence on limiting borrowing.
“It’s important that Germany has elections soon because we need a strong Germany,” Finnish Prime Minister Petteri Orpo told reporters as he arrived at the talks in Budapest.
What Bloomberg Economics Says...
“Germany’s political turmoil, together with Trump’s US election victory, will add to the already very high economic policy uncertainty in the near term. This may prompt businesses to further postpone investment decisions and weigh further on the modest recovery we forecast in the coming quarters.”
—Martin Ademmer, economist. For full note, click here
The conservative frontrunner Friedrich Merz, who is likely to replace Scholz, isn’t exactly an arch European but the collapse of Scholz’s weak and divided government does at least offer the prospect of some clarity to EU leaders as they try to work out how to ramp up their militaries and boost the competitiveness of their economies.
Luxembourg’s Luc Frieden said he thought early elections in Germany would be positive for Europe and NATO Secretary General Mark Rutte said he wasn’t worried by developments.
“Politics will become more complicated in the coming months for obvious reasons,” Poland’s Donald Tusk told reporters in Warsaw as he left for the meeting Thursday. “In our western neighbor we also have a government crisis. This adds even more pepper and salt to this whole situation.”
Scholz may be in for an awkward welcome when he shows up at the meeting later on Thursday. He’s clashed with many of his EU colleagues over the past year as he dug in on his opposition to increasing joint borrowing.
Two senior officials from eastern Europe, where concerns about Russia aggression tend to be most intense, welcomed the prospect of Merz replacing Scholz earlier than expected, because they expect him to be ready to do more on defense.
The EU discussions about how beefing up its militaries have been given extra urgency by Trump’s victory. The next president has long complained that Europe’s NATO members don’t spend enough on defense and at a campaign rally in February he suggested the US might not defend countries that don’t meet the alliance’s target to spend 2% of GDP for defense budgets.
“He was the one in NATO to move over 2%. That is his success and we need to do more,” Rutte said. “Trump is extremely clear about what he wants.”
EU leaders have already had initial conversations with Trump and Hungary’s Viktor Orban, Trump’s biggest supporter in Europe, said that the two men have “big plans.”
The most pressing issue however is Ukraine, where Russian advances have been accelerating and morale is desperate ahead of winter. The Kremlin has been targeting Ukraine’s energy infrastructure with missile attacks leaving Ukrainians facing the risk of blackouts.
“This is a decisive moment in history for us Europeans,” French President Emmanuel Macron said during the meeting’s public session. “Do we want to read history as written by others? Wars started by Vladimir Putin, US elections, choices made by the Chinese when it comes to technology or trade?- or do we want to write it ourselves?”
Some of Ukraine’s allies have started discussing in private whether President Volodymyr Zelenskiy, who is also in Budapest, should seek negotiations with Vladimir Putin in a bid to end the fighting and Trump has promised to quickly reach a settlement.
“I hope Trump’s election will mean the start of some clear and compelling peace talks,” Serbian President Aleksandar Vucic, who maintains close relations with the Kremlin, told Bloomberg.
--With assistance from Jan Bratanic, Andrea Palasciano, Ellen Milligan, Jorge Valero, Andra Timu, Zoltan Simon and Natalia Ojewska.
(Updates with Macron comment in third to last paragraph)
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