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Europe

Hollande, Merkel in battle of wills on austerity

Text by FRANCE 24

Latest update : 2012-05-08

French President-elect Francois Hollande's biggest challenge is to forge a close relationship with German Chancellor Angela Merkel, whose hard-won EU fiscal pact to stabilise the euro zone he heavily criticised.

The close relationship between outgoing French President Nicolas Sarkozy and Angela Merkel was christened “Mer-kozy”.

Now the British press have dubbed newly-elected French leader Francois Hollande’s prospects with the German chancellor “Mer-de” in horror at his promises to boost growth through extra spending at the risk of sinking further into debt.

Merkel must also be feeling somewhat off-balance at losing her close ally Sarkozy, the only French President in 30 years not to win a second term in government.

Instead, she now has to forge a new relationship with Socialist Hollande, who told supporters he wanted to renegotiate the hard-won EU fiscal pact – the brainchild of Sarkozy and Merkel – which lays down tough budgetary and debt controls for European countries.

The day after Hollande’s election victory on Sunday, Merkel said that she would welcome the new French leader with “open arms”. But she also warned that the fiscal pact, which Hollande widely criticised throughout his campaign, was “not up for renegotiation”.

“Merkel would have much preferred to continue working with Sarkozy,” Claire Demesmay of the German Council of Foreign Affairs thinktank told FRANCE 24.

She added that the German chancellor will have a tough time selling “her” austerity programme to Hollande, who hopes France can be a beacon of light in restoring growth to Europe’s battered economies.

But whatever their political differences, she said, “Hollande and Merkel have little choice but to work together.”

Demesnay added that a strong relationship between the French and German leaders was essential in maintaining confidence in the financial markets and preventing another banking crisis, something that no one in Europe wants.

But Angela Merkel has no cause for despair in forging a relationship with Hollande: “Sarkozy was a confusing partner for Berlin. He was highly unpredictable whereas Hollande is seen as more pragmatic.”

And that pragmatism is already being felt: “The German government has made it quite clear that it will remain firm [on the fiscal pact]. But it has also indicated that it would accept some of Hollande’s proposals for boosting growth by giving greater funds to the European Investment Bank.”

France’s soon-to-be-president has also added a semantic shift to ease investors’ concerns. Instead of demanding a complete renegotiation of the fiscal pact, he is talking about “a greater emphasis” on growth.

But it remains to be seen, Demesnay said, if the markets would remain patient.

“Nothing is going to happen until after France’s June parliamentary elections,” she said. “And these will be followed immediately by the summer break.”

In the British press, not known for its kindness towards French politicians, leading business paper the Financial Times was broadly supportive of Hollande, who “could be the catalyst for a much-needed shift in emphasis” – but only if he can build a good relationship with Germany.

Date created : 2012-05-08

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