PARIS — A chill has settled over the Rhine seven months after the election of François Hollande as president of France, reshuffling the cards in Europe’s perpetual power game.
The cooling of traditionally close French-German relations is partly an intentional step by Mr. Hollande, a Socialist, to demonstrate that he is not in the pocket of the conservative German chancellor, Angela Merkel, but instead wants to change the policy direction of the European Union.
It also reflects a fraught process of rebalancing power to accommodate Germany’s greater political heft and economic clout.
Despite vows of ever-closer cooperation that are sure to mark the 50th anniversary next month of the treaty that sealed postwar French-German reconciliation, tension is likely to simmer at least until the next German general election, scheduled for September.
Mr. Hollande was eager to distance himself from the exclusive alliance his conservative predecessor, Nicolas Sarkozy, had with Ms. Merkel, a partnership that became known as Merkozy because of the dominant role the two played in steering the response to the sovereign debt crisis in the euro zone.
Mr. Hollande and Ms. Merkel have differed publicly over the right mix of austerity and growth policies, the future of the euro zone, a European banking union and industrial policy. A series of disputes over common euro zone bonds, the E.U. budget and the aerospace industry have exposed mutual distrust between German and French officials and business leaders, despite entrenched habits of cooperation.
“It’s not an easy dialogue,” said Bruno Le Roux, head of Socialist lawmakers in the French Parliament. “It was on the wrong track for the last couple of years, and the fact that France was in an electoral cycle for a year, and now Germany is in an electoral cycle for a year, doesn’t help.”
Mr. Le Roux, who is close to Mr. Hollande, said that the president had set out to broaden the debate about changing the course of the euro zone by including countries like Italy and Spain that are closer to his approach of “integration with solidarity.”
That had led Ms. Merkel to build bridges with Britain on issues like the E.U. budget, at France’s expense. In the Union’s previous long-term budget, France and Germany cut a deal to preserve the level of E.U. agricultural subsidies — of which the French are the chief beneficiaries. This time around, Berlin gave the cold shoulder to approaches by Paris for a similar pact. In aborted negotiations last month on the 2014-20 budget, Ms. Merkel endorsed lower farm spending despite French pleas. She also backed Britain in its push for deeper cuts in total E.U. expenditure.
Ms. Merkel has expressed public concern about France’s loss of competitiveness. Her finance minister, Wolfgang Schäuble, last month asked a panel of advisers to make economic proposals for France.
In private, senior German officials worry about Mr. Hollande’s ability to secure support in the Socialist Party for the bold shake-up of labor markets, welfare financing and public spending that experts say France needs after the anti-business rhetoric of his election campaign.
Berlin has watched, aghast, a national drama in France over efforts to save 630 jobs at an ArcelorMittal steel plant, including threats to nationalize an aging plant that was shuttered because of chronic overcapacity in the sector. In German eyes, the furor over the Florange plant epitomizes a lack of economic realism and a reflex for state intervention that run counter to business culture in Germany.
Policy makers in Berlin see Mr. Hollande making a gradual turn toward economic reform, but they have yet to be convinced of his determination to stay the course if resistance grows from the left and trade unions.
French-German tensions over power sharing, industrial policy and the role of the state came to a head in the struggle over European Aeronautic Defense Space. Last month, Berlin prevented a merger between EADS, the parent of Airbus, and the British contractor BAE Systems, fearing that Germany would be overruled by French-British military interests.
Germany then demanded a stake in EADS equal to that held by the French. The result was a shake-up at EADS in which Berlin paid more than $2 billion to buy a stake matching that of France, only to see the role of state shareholders greatly reduced by new governance arrangements at EADS.
The Germans are “obsessed with parity because they are convinced the French want to take over the company, just as the French are convinced the Germans want to take it over,” said a person involved in the negotiations, who spoke on the condition of anonymity.
Germany is no longer willing to sign the checks while letting France take the lead in Europe, as it did in the past to atone for World War II or to ease the way for German unification.
EADS is a paradigm for wider difficulties in relations, because of the mutual suspicion and because of Berlin’s determination to assert its increased power in a venture in which the French previously had the upper hand.
Mr. Hollande argues that each step toward integration in the euro zone should be preceded by an increase in “solidarity” — code for Germany’s doing more to support the weaker southern states. In contrast, Ms. Merkel insists that there must be greater central control of national budgetary and economic policies to ensure they respect E.U. rules before any sharing of liabilities.
Mr. Hollande advocates common euro zone bonds to help pay off those countries’ accumulated debts. He also wants joint deposit insurance in which German depositors and taxpayers would underwrite shaky banks in other euro zone states. Both ideas are anathema in Germany, at least this side of the election and probably for much longer.
Annoyed by Mr. Hollande’s perceived attempts to isolate her, Ms. Merkel has reached out to other partners to strengthen her hand in European negotiations. In an essay titled “After Merkozy, how France and Germany can make Europe work,” Ulrike Guérot and Thomas Klau of the European Council on Foreign Relations recount how Berlin lines up support from the Dutch and Finns — fellow north European AAA-rated nations — before dealing with the French.
“We call the French only once we have established a common position among our group of like-minded countries,” they quoted a German official involved in financial negotiations as saying. “Once we start speaking with the French, then the trouble starts.”
Paul Taylor is a Reuters correspondent.
Article source: http://www.nytimes.com/2012/12/11/business/global/rebalancing-the-french-german-partnership.html?partner=rss&emc=rss
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