Euro crisis: Can Merkel and Hollande find compromise?

 
French President-Elect Francois Hollande celebrates victory in the place de la Cathedrale on May 6, 2012 in Tulle, France Francois Hollande made opposition to austerity a major theme of his campaign

The relationship between France and Germany has been the backbone of Europe since World War II.

Helmut Kohl and Francois Mitterrand had famously held hands as they recalled the waste of lives at the Battle of Verdun.

"Europe cannot move ahead without the Franco-German engine," said former French President Valery Giscard d'Estaing.

General de Gaulle had described Germany as the horse and France the jockey. President Nicolas Sarkozy described the two countries as "opposite twins".

Never have the leaders of France and Germany been so important to the future of Europe as now - with the eurozone crisis drifting dangerously.

Hours after being sworn in as French president, Francois Hollande will fly to Berlin for dinner with Chancellor Angela Merkel. She has said she will welcome him "with open arms".

Harsh lessons

Start Quote

Austerity can no longer be the only option”

End Quote Francois Hollande

But her embrace will hide some embarrassment. She had openly backed President Sarkozy during the French election and nearly campaigned for him.

In Berlin there is suspicion of Mr Hollande. They do not like the fact that during the campaign he raised the standard against austerity and championed growth. Many saw that as a bid to reclaim French leadership in Europe.

Politically they come from different sides of the tracks.

Chancellor Merkel, who grew up in former communist East Germany, is mindful of German history and the lessons from the Weimar Republic - that inflation left unchecked could destroy democracy.

She has praised the wisdom of the Swabian housewife, a model southern German citizen, famed for frugality and thrift. Her instinctive attitude to the Greeks and others was that they had to be taught a lesson, that they needed to live within their means.

Former Greek Prime Minister George Papandreou had pleaded with Angela Merkel for easier terms for the first bailout loan.

She had replied: "We want to make sure nobody else will want this." The bailout terms were intended as a harsh lesson to others.

'Tax and spend socialist'

Mr Hollande is a socialist who cut his political teeth during the presidency of Francois Mitterrand.

French President Nicolas Sarkozy looks at German Chancellor Angela Merkel at a press conference in 2008 German Chancellor Angela Merkel had openly backed Nicolas Sarkozy's bid for a second term

His keenest instinct is to preserve the French way of life, with its social welfare model. During his campaign he promised to raise the minimum wage, hire tens of thousands of new teachers and water down the retirement age.

Politically she regards him as a tax-and-spend socialist.

Their most critical division is over austerity. Francois Hollande does not believe the policy is working.

"Austerity can no longer be the only option," he said. During the campaign he pledged to renegotiate the so-called "stability pact" aimed at enforcing discipline in the eurozone.

For Chancellor Merkel this pact is the key to the future survival of the single currency. She has repeatedly stated it is "not open to new negotiations".

Mr Hollande shot back, saying "it is not for Germany to decide for the rest of Europe".

The view in Berlin is that the new French president did not level with his audiences. Privately they made it clear that there could be no renegotiation. They believe that Mr Hollande understands that.

Compromise?

They have not, however, been encouraged by remarks from the Socialist Party spokesman Benoit Hamon, who told French television: "We did not vote for there to be a president of the European Union named Mrs Merkel, who decides on the fate of all the others."

Politically they understand it will be difficult for Mr Hollande to back away from his pledge to renegotiate the pact - at least until after the parliamentary elections in June.

Officials then expect some compromise.

Chancellor Merkel will accept a growth commitment to be attached to the stability pact. She will be prepared to see EU funds diverted to major infrastructure projects and to see the capital base of the European Investment Bank expanded.

What she will not compromise on is her opposition to growth being financed through borrowing.

Some of these discussions will be tense and difficult. Mrs Merkel, for instance, will oppose the European Central Bank being able to lend directly to governments.

One of the first questions that will be put to the new French leader is where he stands on Greece. Does he go along with the German government in insisting that Greece accept the terms of the bailout deal if it is to stay in the eurozone?

Or does he believe that there will have to be some easing of the terms through a renegotiation? That decision may have to be taken within weeks.

Mr Hollande also appears to want France and Germany to be less dominant.

"The Franco-German relationship has been exclusive," he said. "European institutions have been neglected and some countries, notably the more fragile ones, have had the unpleasant feeling of facing an executive board."

The Germans are anxious the new French president may compete for allies within the EU.

The key for Berlin is that Mr Hollande sticks to his promise to balance the budget by 2017 and to bring the French deficit down to 3% by next year.

Reality, officials in Berlin say, will give the French president very little room for manoeuvre.

Whatever their differences, the crisis in the eurozone will put them under huge pressure to compromise.

After all, Chancellor Merkel and Nicolas Sarkozy did not like each other at first but ended up being called "Merkozy" - such was their closeness.

 
Gavin Hewitt, Europe editor Article written by Gavin Hewitt Gavin Hewitt Europe editor

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  • rate this
    0

    Comment number 291.

    @ 289 All for All

    No, please, stop! I truly do not have the faintest clue what you’re on about and nor, I suspect, does anyone else. I mean this in the nicest possible way. Honest.

  • rate this
    0

    Comment number 290.

    I hope Greeks vote Syriza and get out of the Euro. Maybe the wealth-destroying thing will then finally start its well deserved collapse.

    How many more millions must be made unemployed and driven into poverty to keep a megalomaniacal political project (unwanted by many) alive.

  • rate this
    -1

    Comment number 289.

    SASmule@283
    Can they compromise?

    Respect for service: mine 'only' health-plus

    Both trusted: 'give life' for society bound for Good, not Evil

    You see: "gross inequalities" @277, worsening @269

    Soldiers 'stand together', not swayed by money?

    On high, deals, to protect 'Force', honour PEOPLE, 'despite politics'

    We 'hope' we serve / die 'for democracy'

    Truth not just complicated: urgent to face

  • rate this
    +2

    Comment number 288.

    284 DM
    "Margaret why do you have a problem with the Falkland islanders having a choice of their own destiny"
    =
    My reply had nothing to do with the Falklands but Thatcher's unpleasant triumphalism at the time compared to Merkel's quiet stoicism now.
    As for wanting the English to be ruled by Merkel - I leave that to the Queen.
    I certainly don't hate them - but why do you hate Europe so much?

  • rate this
    +2

    Comment number 287.

    @284 DMR
    Margaret doesn’t have a problem with Falkland Islanders’ democracy, just with Maggie’s ghastly hectoring voice. I can still hear it in my head 30 years on. Ugh!

  • rate this
    0

    Comment number 286.

    285 All for All

    Folly and hypocrisy , very likely, but also from the repeating of old patterns of behavior.

  • rate this
    -1

    Comment number 285.

    DMR@282

    'Weakness of Europe' is of us all, not "never be able to stand together", but told - until too late believing - that we have to play at schizophrenia, 'nice at home, nasty at work'

    We teach 'Christian values' & 'protect' from work until 14, or 16, or 18, or 21, even 24, then allocate: rich, poor, or 'unemployed'

    'Europe' failing, again, not from 'unity', from reverse

    Folly & Hypocrisy

  • rate this
    -2

    Comment number 284.

    280, Margaret why do you have a problem with the Falkland islanders having a choice of their own destiny.
    I know you'd like the English to be ruled by Merkel, do you have a complete disregard for democracy? Your hatred of the English is not rational.

  • rate this
    0

    Comment number 283.

    @279 All for All
    I am still none the wiser but you may be right - I was merely a simple soldier whereas you are clearly an intellectual. As the former I was involved in 5 wars in 3 armies (2 Muslim) plus 7 more as a frontline observer which is why I fear the possibly impending violence. I trust the young men armed with machetes and AKs will understand your subtleties. In my experience they won’t

  • rate this
    -1

    Comment number 282.

    270, DM doesn't stand for democracy. I am sick of the ordinary Greek citizen being vilified by the German press, to make a case for the cruel punishment being inflicted on a people for the mistakes of their leaders.
    If this is European unity, give me a referendum now.
    I think what is happening now proves Europe will never be able to stand together.

  • rate this
    +2

    Comment number 281.

    230 TimOthy
    " $US going up against the Euro think of all those European products you can buy. GM will love that "
    ===
    Nor forgetting Airbus - it already achieved over twice as many sales for 2011 than Boeing. Superior technology will now be joined by a competitve currency.

    Apart from the computers and electronics who buys American goods? I suppose they sell some to the third world.

  • rate this
    +2

    Comment number 280.

    216 Evil twin
    "Angela is always perfectly happy to compromise with people provided they do everything she says"
    =======
    You do her an injustice. I admire her calm stoicism in trying to face and help solve a situation not of her making.

    Can you imagine her crowing "Rejoice, Rejoice" as Margaret Thatcher did during the Falklands?

  • rate this
    0

    Comment number 279.

    SASmule @275

    Just in case

    Inequality has varieties - and an opposite

  • rate this
    +3

    Comment number 278.

    While we in Europe are trying to cope with the effects of austerity this is what the Fed think of it:-
    http://www.bbc.co.uk/news/business-18098015
    Strange isn't it? We get Mr Geithner over here lecturing us on the need for austerity but back home the Fed are saying 'whoa there'.
    One could be excused for thinking there is an ulterior motive here.

  • rate this
    +2

    Comment number 277.

    @274 DurstigerMann

    These massive delays in moderation are maddening! That aside, there was huge inflation in the 70s which didn’t damage the middle classes. The current gross inequalities are a product of the late 90s and the last decade, an era which in Britain at least was overseen by so-called socialists. Personally, I am deeply fearful of the consequences, not just in Europe but worldwide.

  • rate this
    +1

    Comment number 276.

    267.Suilerua
    ".It's not a union, it's more like a group of mafia crime families."
    ON that I defer to your judgement.
    We will have to bow to your clearly superior and more intimate knowledge of such.

  • rate this
    +1

    Comment number 275.

    @273 All for All

    Pardon??

  • rate this
    -2

    Comment number 274.

    @269 SA Smule
    I think Ron Paul explained the problem quite well a couple of years ago: "when you inflate a currency, the middle class gets wiped out. The people who get to use the money first, which is created by the FED system, benefit. So the money gravitates to the banks and to wall street."

    FIAT systems are great wealth creators, but they inevitably lead to a big bang/reset over the decades.

  • rate this
    -1

    Comment number 273.

    SASmule@269
    "disorder"

    Put like that, a people divided (by?), a state so weakened (by?), down to 'hoping' martial law will come soon, both benign & unchallenged

    What dictionary might be used, by military & masses, for hope of agreeing 'the benign'?

    Great '-isms' failures, Greed & Fear destructive, Euro-democracy a travesty, might Greece return to philosophy: unto others as you would be done by?

  • rate this
    -1

    Comment number 272.

    264 Lucy
    "I am not seeking to draw your ire nor irritate you
    I have learned lots on here"
    ====
    Sorry Lucy, I was just pulling your leg. I do appreciate your contributions as they are always fair and thoughtful. Do carry on.

 

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