The French president must learn to dance with a dominant German chancellor
THE Merkozy era is over. So how to label the partnership of Angela Merkel and François Hollande? Merging first names to make Frangela is too familiar for leaders who barely know each other. Homer is too American (or worse, Greek). Merkollande sounds too close to Merkozy. That leaves just the shortened Merde, which at least sums up the state of the euro.
In fact, the Merkozy duo was unique in having a nickname. It was coined at the height of the euro crisis last year to mock a duumvirate that had become exclusive, dictatorial and sometimes comical in the way a weakened Mr Sarkozy pretended to be the equal of the powerful German chancellor. Mr Hollande wants a different sort of partnership. He flew to Berlin after his inauguration in Paris to emphasise the importance and continuity of Franco-German relations. Unlike Mr Sarkozy, who would pretend to be in perfect agreement with Mrs Merkel, Mr Hollande was not shy about saying he did not see the world the same way.
In the coming weeks the two sides will discuss how to reconcile the fiscal compact, the Merkel-inspired treaty to enforce budget discipline, with Mr Hollande’s emphasis on stimulating growth. All ideas, including Eurobonds, should be “put on the table” at an informal dinner for European leaders in Brussels on May 23rd, he said. He would no doubt like also to revert to the traditional nomenclature: Hollande-Merkel. Putting France first would recall past partnerships, such as Chirac-Schröder or Mitterrand-Kohl. The hyphen maintains separate identities while symbolising co-operation across the Rhine. Franco-German reconciliation lies at the heart of the European project, from the creation of the European Coal and Steel Community in 1951 to the launch of the single European currency in 1999.
Chancellor Helmut Kohl wanted a strong Germany in a strong Europe. But the euro crisis has created something different: a strong Germany in a weak euro zone. Northern Europe, powered by Germany, continues to grow, whereas southern Europe sinks into recession. Germany enjoys historically low borrowing costs even as higher bond yields push the periphery towards insolvency. France, the euro zone’s second-largest economy, finds itself in the middle: not in recession, but at risk of being sucked into the Mediterranean vortex.
The old dictum that the Franco-German partnership disguises France’s weakness and Germany’s strength is truer than ever. France compensates by taking the lead in defence and diplomacy (the French and British led the intervention in Libya, the Germans stayed out). But the euro crisis puts the focus on economics and public finances. All too often, Mr Sarkozy yielded to Mrs Merkel on economic substance, while causing friction by demanding concessions on form—above all on the nature of the euro zone’s “economic governance”. France pushed for a smaller core of euro-zone countries controlled by national leaders; Germany preferred a more inclusive club including non-euro members, with more involvement for EU institutions.
Now Mr Hollande seeks a different bargain. Instead of balancing European rules with national prerogatives, he is more concerned to slow the pace of austerity. Where is the money for a growth package to come from? Europe, suggests Mr Hollande, meaning that Germany must pay more.
Both leaders are operating in a climate of popular resentment. Many in France feel the EU has become too big, too open, too liberal and too English-speaking. Rather than projecting French influence in the world, it is bringing globalisation to France. A devotee of both François Mitterrand and Jacques Delors, a former president of the European Commission, Mr Hollande campaigned for the EU’s constitutional treaty in 2005. But many in his party voted against it. For its part, Germany reckons that it sacrificed its cherished D-mark for Europe, in return for solemn promises of fiscal discipline. Now that it is having to stake hundreds of billions of euros to save the currency, it feels betrayed.
The crisis presents both leaders with hard choices. If Germany wants to save the euro it will have to accept greater risk- and burden-sharing, not least by mutualising some of the euro zone’s debt and devising a Europe-wide system to stabilise banks. And if it is to survive economically and regain lost competitiveness, France will have to embark on structural reforms that it has fought hard to avoid.
A barn dance, not a tango
One way or the other, Mr Hollande and Mrs Merkel must reach a deal. Mrs Merkel knows that standing out as Europe’s taskmistress will be resented. Mr Hollande needs the partnership to maintain political and economic credibility. A deal is also vital to the functioning of European institutions, not because France and Germany always agree, but precisely because they so often do not. And that may be even truer with Mr Hollande in the Elysée. The hope is that, hailing as they do from rival political families, any deal they reach should be acceptable to everybody else.
Mr Hollande’s cordial and consensual manner may help. And he has some allies. Southern Europeans hope his growth agenda will bring relief from austerity. The German Social Democrats back his demand for growth-boosting measures as the price for ratifying the fiscal compact. Yet Franco-German agreement is no longer sufficient to fix the euro’s problems. Ex-communist economies of eastern Europe, such as Estonia and Latvia, offer many lessons on combining austerity and structural reforms to return to growth. And reformers in southern Europe, such as Italy’s Mario Monti, should be heard when they argue that deepening Europe’s single market, notably in services, has huge potential. A growth pact relying on extra spending alone would be incomplete, and might even make things worse.
Source: the Economist