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Opinion: 'Merkollande' for Europe

France's new President, Francois Hollande, wants to loosen the eurozone's strict austerity course. Chancellor Merkel aims for a cooperative relationship. Both are heading towards "Merkollande," says DW's Bernd Riegert.

France has reached a decision, but few things will change immediately at the European level. The Socialist Francois Hollande has announced he wants to renegotiate terms of the European fiscal pact to move away from the strict savings course set by the "Merkozy" duo of German Chancellor Angela Merkel and now former French President Nicolas Sarkozy.

But so far there are no realistic alternatives on the table to consolidating national budgets by making spending cuts. Hollande will have to recognize this fact within a few short weeks. France's new leader will get a stimulus package as an addition and supplement to the already signed fiscal pact, but that will be all. This concession has already been established by Germany's chancellor, Luxembourg leader and euro group president, Jean-Claude Juncker, and the President of the European Central Bank, Mario Draghi.

France's new president should be able to begin his term successfully without having to dig back into a fiscal pact that has already been ratified in several countries.

Everyone in the EU supports economic growth. It is entirely fine if Hollande and his advisers want to emphasize that point and make it resonate in the media. But Hollande should not begin his new term by creating a conflict with Berlin. In the long term, good cooperation between Paris and Berlin is indispensable for the European Union, regardless of which ideology holds sway over voters at a given time.

It is probable that Merkel and Hollande will melt into "Merkollande" after a few months of getting a sense for one another. But it will represent a marriage of convenience more than anything else. The conservative chancellor will perhaps be drawn to Francois Hollande's quieter personality - in contrast to Nicolas Sarkozy's impulsiveness. France and Germany will remain the motors driving the EU even though there may be some sputtering at first.

Bonded by necessity

DW's Bernd Riegert

DW's Bernd Riegert sees capitulation ahead for Hollande

It was no different with Merkel and Sarkozy. France's outgoing leader, known for his glitz and glamor and even nicknamed the "bling bling" president by some, often offended Merkel's sensibilities during his first years in office. He wanted to cut some ties with Berlin and preferred to work with Spain, seeking union among the Mediterranean states as a counterbalance to the EU as a whole.

That plan failed, and ultimately 'Merkozy' was born on the beach of Deauville in fall 2010 as the two heads of state began to act in lockstep on the eurozone's debt crisis. It was the sheer fiscal and political necessity that brought the two together. The concrete positions that Merkozy went on to support changed often, but Germany's chancellor and the French president showed decisive agreement. During his re-election campaign, Sarkozy even discussed Germany as a role model.

The new Socialist President Francois Hollande has praised some aspects of German policy, but points mostly to its social achievements and not toward its budget and the debt limits that Berlin's center-right coalition government favors. But within his first weeks in office, economic realities will force Hollande to announce plans to set France on a savings course. Should Hollande decide not to refrain from taking on new debts, the markets will have little patience with Paris. Interest rates could rise for France while its credit rating falls.

Unavoidable realities

Francois Hollande will have little leeway when it comes to fulfilling his campaign promises. The deficit in 2011 was at five percent. Hollande will be unable to avoid both pension reform and the reduction of personnel costs in France's enormous public sector.

Hollande has yet to present exact plans for how he wants to raise his country out of its financial doldrums. There is no money available for stimulus programs, or for lowering sales taxes. His planned tax on the rich will not bring in much revenue. France's unemployment rate is high, and voters will measure their new president's success in no small part by his ability to reduce unemployment.

Francois Hollande

Hollande backs Eurobonds opposed by Germany

The new president has said he plans to achieve low interest rates by buying Eurobonds, government loans backed collectively by all eurozone states. But since the proposed bonds would expose Germany to new financial risks, Merkel has strictly opposed them. Hollande would like to see the European Central Bank, an independent body, do more to promote economic growth. But, at least for the moment, the German government and the currency watchdogs at the bank do not support such a move.

Looking ahead

Francois Hollande will have to recognize that the eurozone and the EU cannot be driven negligently into a new phase of the crisis. If France falters, then efforts to consolidate budgets in Portugal, Spain, Italy and other countries struggling with the crisis will slack. That would have fatal consequences for the euro as a joint currency.

If Greece elects a government incapable of taking action and falls into chaos, the country will ultimately have to leave the eurozone. The currency union could survive, but if France were to fall further into crisis, that would be the end of the euro. And if Hollande does not grasp that, euro group head Jean-Claude Juncker is prepared to offer the new president some help. Hollande, who has never held a high governmental office, should take him up on the offer for the sake of Europe.

Germany is now the last major eurozone player that has yet to see a change of government since the beginning of the European debt crisis. In 2013, Chancellor Merkel and her agenda to save the euro will come under voters' scrutiny. She cannot be certain that Germany will not join the ranks of those who have ousted their heads of state. Though Germany's growth has been better than in the rest of Europe, that can change quickly, and the eurozone crisis is far from over.

Author: Bernd Riegert / gsw
Editor: Gregg Benzow

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