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Analysis
Hopes and fears for Hollande-Merkel meeting

Hopes and fears for Hollande-Merkel meeting

Parlous time for economic and monetary union

by David Marsh in Berlin

Mon 14 May 2012

When German Chancellor Helmut Kohl met French President François Mitterrand for the first time in Paris on 4 October 1982, 65-year-old Mitterrand somewhat disparagingly told the freshly-anointed West German leader, 13 years his junior: 'You are young. This is just a phase in your life. But the two of us can serve our countries.'

François Hollande, French president-elect, visits Chancellor Angela Merkel in Berlin tomorrow, just a few hours after being sworn in as head of state in Paris, at a particularly difficult time for economic and monetary union (EMU).

Like their two predecessors 30 years ago, they have never previously met. Hollande, who served as an advisor to Mitterrand, is the same age as Merkel (57) and is banking on an alliance of equals. He will find that all partners in EMU are equal - but Germany is more equal than others.

Hollande’s victory over Nicolas Sarkozy 8 days ago propelled him to the forefront of an anti-austerity campaign in Europe that attempts to break Germany’s policy control over EMU. In terms of economic performance, Germany holds all the cards. Politically, however, Merkel is on the defensive. Overhanging Tuesday's meeting is a mix of hope and fear.

The Chancellor's troubles have worsened as EMU storm clouds blacken. On Friday, Germany's best-selling daily Bild-Zeitung, in a front page story that attracted wide political attention, accused the Bundesbank of weakening the euro and highlighted the German central bank’s compliance with higher-than-average German inflation by screaming 'Inflation Alarm'. The influential news magazine Der Spiegel published its latest edition this weekend with the cover story, 'Acropolis Adieu: why Greece must now leave the euro.'

During the French presidential election campaign, Hollande repeatedly challenged Germany over the doctrine of fiscal orthodoxy that many blame for exacerbating Europe's difficulties. Tomorrow, over Greece’s defiance on conditions for staying in EMU, Hollande will face an immediate test. Merkel will ask him: 'Are you for me or against me?' Hollande will have no choice but to back the Merkel line that Greece must stick to the tough conditions of its debt relief programme. If not, an outcome that looks increasingly likely, it will have to forsake the euro and go back to the drachma.

On balance, Hollande is likely to pass his first examination without too much difficulty. There will be much smiling and talk of 'growth pacts'. His status in Berlin is boosted by three factors.

First, Merkel is on the back foot politically in Germany following yet another defeat for her hapless Christian Democrat party in regional elections yesterday in the most populous state of North Rhine-Westphalia, home to many of Germany’s top industrial companies.

The roughly 8 percentage point CDU loss and the victory of current state Prime Minister, Social Democrat Hannelore Kraft - who had governed without an absolute majority for two years - damages Merkel’s clout at home and abroad.

Second, Hollande can capture the moral high ground, at least initially, as Merkel digests the consequences of cold-shouldering him during the campaign. Merkel refused to receive Hollande when he visited Germany earlier this year, sent her party general secretary Hermann Gröhe to make a defamatory speech about him in France three and a half months ago, and pledged she would campaign for the deeply unpopular Sarkozy – only to withdraw when it became plain that the idea favoured Hollande.

Gröhe, not a man for highly-skilled diplomacy, attacked Hollande in France at the end of January for proposing ‘outdated concepts and left-wing dreams from the scrap-heap of politics’ and said Hollande as president would be a 'drag' on European integration.

Third, Germany may have become less economically dependent on France, but Hollande can make clear to Merkel that French political support is crucial. According to Prof. Michael Stürmer, a former advisor to past Chancellor Helmut Kohl, chief correspondent of Die Welt daily newspaper and a member of the OMFIF Advisory Board, it would be 'a disaster for Germany' if Berlin was ever to lose France’s allegiance on the euro, because of the weakness and provincialism of the German political class. 'Germany needs France to project itself politically in the world.' Underlining how Germany, in spite of its economic prowess, needs France’s skills, Prof. Stürmer says, 'German politicians use Berlin’s political architecture to blow a lot of hot air – but it is all empty. There is no sense of responsibility or even self-interest.'

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