MERKOZY IS DEAD, LONG LIVE THE FRANCO-GERMAN ALLIANCE
Angela Merkel openly supported Nicolas Sarkozy during France’s just concluded presidential campaign. Now that her man was beaten by Socialist candidate François Hollande, Merkel is ready to make concessions on growth, but won’t budge on deficit.
BERLIN – Germany may welcome Francois Hollande with “open arms,” but Angela Merkel has already made one thing very clear: “The fiscal pact is not up for discussion.”
The German chancellor was pulling for Nicolas Sarkozy to be reelected. She will now have to get used to a new partner whom she barely knows. Indeed, she refused to meet François Hollande during the French presidential campaign.
“There were contacts beforehand. The debate wasn’t always easy, but discussions took place and both teams are now better prepared to each other than in 2007,” says Chantal Mairesse from the Genshagen Foundation. That’s also because, unlike Nicolas Sarkozy five years ago, Hollande has several Germanophiles among his top advisors.
“Between France and Germany, it’s not about people,” says German member of Parliament Andreas Schockenhoff. “Both teams will have to work in a constructive fashion and not waste time.”
Merkel’s real worry isn’t the new French president, but financial markets that seem – at least from Berlin – to be waiting for Paris to quickly express support for the fiscal pact, before the Irish referendum later this month. Insiders of Merkel’s party, the CDU, say that if France is seen dragging its feet, the Irish will say ‘No’ to the pact -- and that will be the end of the common currency.
The "G" word
On both sides of the Rhine, commentators believe the new French president won’t clash head on with German interests. Merkel is also aware that she will have to soften her stance.
In recent speeches, the German chancellor has started mentioning ‘growth’ as a tool in the fight against the debt crisis. But she hasn’t given an inch on fiscal discipline.
“A newly elected president must present a few successes to his voters,” says Schockenhoff. “One way or another, he will have to rewrite a line here and there in the fiscal pact to make it seem as if he got something out of Germany.”
And that without Berlin thinking it has budged at all. “There are fundamental lines that must be followed, but in between there is some leeway if you have smart negotiations,” says Stefan Seidendorf from the Franco-German Institute of Ludwigsburg.
Three of the proposals Hollande wants to submit to his European partners in order to kick start growth are acceptable to Merkel: opening more funding options for the European Investment Bank, mobilizing any leftover European structural funds not currently used, and creating a tax on financial transactions.
Hollande’s fourth proposal – creating euro bonds – has been met with a very public Nein. For Germany, it is unthinkable to mutualize the debt of southern European countries. At least for now. “When Angela Merkel says she won’t do something, we know she’ll change her mind tomorrow or the day after,” jokes Axel Schafer, a Social Democrat member of the Bundestag. Indeed, his own party, once hostile to euro bonds, has just started supporting them.