Don't miss

Replay


LATEST SHOWS

MEDIAWATCH

#MeToo and #BalanceTonPorc exposes extent of sexual harrassment

Read more

FOCUS

Turkey's brain drain: Talents turn their backs to limited freedom and declining economy

Read more

TALKING EUROPE

Internet giants: Too big to be taxed?

Read more

TALKING EUROPE

EU’s Karl-Heinz Lambertz: ‘Empowering regions and cities very important for Europe’s future’

Read more

ENCORE!

Music show: Client Liaison, Boyz II Men & Jessie Ware

Read more

THE WORLD THIS WEEK

Iran deal decertified: Trump disavows nuclear agreement without walking away from it

Read more

BUSINESS DAILY

British PM heads to Brussels amid Brexit standoff

Read more

IN THE PAPERS

Why was Hollywood so quick to shun Harvey Weinstein and not others?

Read more

IN THE PAPERS

'Squeal on your pig': French women share sexual assault experiences on Twitter

Read more

Business

As Germany squeezes Greece, where does France stand?

© Kirill Kudryavtsev, AFP | German Chancellor Angela Merkel and French President François Hollande attend talks on the Ukraine crisis in Minsk on February 12

Text by Benjamin DODMAN

Latest update : 2015-02-20

French President François Hollande has cast himself as a mediator in the increasingly acrimonious tussle between Germany, as Europe's paymaster, and Greece. But his new role is a measure of how far he has backtracked on austerity.

It was not so long ago that France – not Greece – was the champion of Europe’s anti-austerity camp. In the run-up to his successful presidential bid in 2012, François Hollande was full of fiery rhetoric about ditching belt-tightening and promoting growth. The German chancellor, he said, would simply have to back down. As it turned out, Angela Merkel has barely budged.

In his first weeks in office, Hollande huffed and puffed but precious little happened. Paris did secure a vague pledge to promote growth in the EU, but Germany’s hallowed “stability pact” – which places a strict 3% cap on budget deficits across the EU – remained intact while Hollande’s cherished Eurobonds were junked.

More than two years later, the only U-turn in economic policy has come from France itself, with the Socialist government abandoning its traditional Keynesian ethos in favour of supply-side economics. Unveiled in January 2014 but yet to be implemented, its “responsibility pact” was meant to introduce greater flexibility in the labour market in return for a promise by companies to hire more workers. Naturally, it prompted applause in Berlin and dismay among European left-wingers.

Austerity’s new foes

The recent rise of anti-austerity parties in southern Europe, chief among them Greece’s Syriza and Spain’s Podemos, has revived calls for a change of policy across the continent. French economist Philippe Légé says Syriza’s triumphant election in Greece has presented France with a golden opportunity to resume its battle against the budgetary orthodoxy preached by Berlin.

“This was the chance to tell the German government that its policies are contradictory: that Germany cannot hope to recover the money it lent Greece unless it allows the Greek government to rebuild its economy; that rebuilding Greece’s economy is impossible so long as the German economy maintains its huge current account surplus; and that this surplus is the Eurozone’s main problem,” he said. “But the French government flunked it, they haven’t made a single meaningful gesture.”

How do you say 'austerity' in German?

Paris gave Greece’s new Prime Minister Alexis Tsipras a sympathetic hearing as he toured European capitals earlier this month looking for debt relief. But French officials were noticeably non-committal when it came to supporting his pleas to ease the austerity measures imposed on Greece by its EU creditors.

Tsipras said Europe needed France to play the role of “guarantor” and “protagonist” in efforts to promote “growth and social cohesion”. In return, Hollande reminded Greece’s youthful leader that EU rules applied to all members before suggesting that Athens learn from French “expertise” when it comes to fiscal reform – “on which we are specialists”, he said.

The suggestion no doubt raised a few eyebrows among EU officials exasperated by the pace of reform in France.

‘Trojan horse’

Greece’s new leaders stormed to power on a promise to scrap part of the belt-tightening measures attached to a bailout deal worth €240 billion, a fifth of which was financed by Germany. They point out that six years of depression and five years of austerity have wiped out a third of the country’s industry and slashed GDP by a quarter, pushing millions into poverty. Meanwhile, the country’s debt burden has actually increased as a percentage of GDP because of the shrinking economy.

Germany disputes this and argues that Greece needs more austerity, not less. Failure to reach a deal before the current bailout programme expires at the end of the month would trigger a Greek default and possible exit from the eurozone.

On Friday, finance ministers from the single-currency block were locked in a third round of crunch talks over Greece’s bailout, a day after Berlin knocked back a compromise proposal put forward by Athens. Widely seen as a climb-down on some of Greece’s key demands, the proposal was welcomed by the European Commission.

But in a sign of division within the EU, German officials swiftly dismissed it as a “Trojan horse” designed to let Athens dodge the harsh austerity measures attached to the current bailout deal. As the Guardian’s Larry Elliott wrote, Germany had effectively “refuse[d] Greece an honourable surrender”, seeking a “capitulation” instead.

Warming up to Merkel

Germany is by no means the only country opposed to making concessions to Greece. Slovakia has emerged as the fiercest critic of Athens, while the Baltic states are equally uncompromising. But all are content to let Berlin play bad cop. In contrast, Greece’s only true backing so far has come from across the Atlantic, with US President Barack Obama warning Europe against “squeezing countries that are in the midst of depression”. With the partial exception of Italy, which endorsed Greece’s proposal on Thursday, Europe’s professed opponents of austerity have proved far less vocal. And whether France’s finance minister would offer some support to his beleaguered Greek counterpart in Friday’s crucial talks was far from certain.

Hollande told Tsipras he would try to appease the German chancellor when the two met for lunch in Paris on Friday, Greek officials said. "Greece is in the eurozone. Greece has to stay in the eurozone," the French president told reporters after the talks. In an apparent softening of Germany’s stance, Merkel called for an “improvement” in the Greek proposal, without rejecting it outright.

But it was not clear how far Hollande was prepared to push the German chancellor, with whom he has enjoyed something of a honeymoon of late. The two exchanged a warm embrace ahead of a march against terrorism in Paris last month and have worked hand in hand to secure a ceasefire in Ukraine.

Hollande may well be reluctant to jeopardise this partnership at a time when foreign policy and the fight against terror appear to be the only factors propping up his abysmal approval rates.

“Polishing his image seems to be his chief preoccupation nowadays,” says Légé, pointing to Hollande’s failure to mention France’s record-high unemployment in his annual policy speech last month. “But sooner or later the economy will come back to haunt him.”

 

Date created : 2015-02-20

  • GREECE - GERMANY

    Berlin rejects loan extension despite Greek concessions

    Read more

  • GERMANY - GREECE

    How do you say ‘austerity’ in German? You don’t

    Read more

  • GERMANY - GREECE

    The debt write-off behind Germany's 'economic miracle'

    Read more

COMMENT(S)