Merkel and Hollande prepare to court each other for marriage of convenience

Tue, May 8, 2012, 01:00

Common interest is expected to provide the makings of a solid working relationship, write RUADHAN MAC CORMAICin Paris and DEREK SCALLYin Berlin

THE MERKEL-Sarkozy axis is no more, the German chancellor having lost her closest ally in the debt crisis. But in the fickle world of European diplomacy, the focus has already shifted to the vital relationship that will replace it.

Incoming French president François Hollande will travel to Berlin on his first overseas trip next week, intent on underlining his attachment to the Franco-German bond and lobbying for the growth pact that he promised voters before Sunday’s election.

After five often-frustrating years dealing with Nicolas Sarkozy’s flightiness, there was more melancholy than Schadenfreude at his departure in Berlin’s corridors of power yesterday. “It’s a real shame to see him go,” said one confidante of Angela Merkel. “It wasn’t always easy but she [Merkel] found her way to him and managed to do good work with him.”

And how does the lady view her new French partner? In public she promised to welcome him with “open arms” but, behind closed doors, her arms are firmly folded in wait-and-see mode.

Merkel’s inner circle are cautious about the optimistic suggestion that Hollande, more modest than mercurial, is a better personality fit for the pragmatic, drama-free German leader than his predecessor. “Not necessarily,” said an adviser. “Sometimes it’s opposites that attract in the end and do the business.”

Initial awkwardness notwithstanding, the expectation is that common interest, and the symbiosis that always underpins the Paris-Berlin relationship, will provide the makings of a solid working relationship.

The French side make light of Merkel’s refusal to meet Hollande during the campaign, and point out that some of the best Franco-German double-acts – Valéry Giscard d’Estaing and Helmut Schmidt, or Helmut Kohl and François Mitterrand – straddled the left/right divide. One of the leading candidates for the prime minister’s job is Jean-Marc Ayrault, a fluent German speaker with good contacts in Berlin and a sensitivity to views on the other side of the Rhine.

Hollande’s campaign manager, Pierre Moscovici, was keen to point out that Merkel was the first foreign leader to call the president-elect on Sunday evening.

German officials, for their part, dismiss claims that Merkel’s refusal to meet Hollande as challenger will complicate her working relationship with the new president. They point to the Obama precedent: after working well with US president George W Bush and famously blocking Barack Obama’s campaign rally at the Brandenburg Gate, Merkel went on to strike up a cordial, if not hearty, relationship with the current White House occupant.

German officials reached out to Hollande’s camp in the final weeks of the campaign and have a week to agree the broad strokes of his first official trip to Berlin, expected next Tuesday or Wednesday.

The meeting is expected to be dominated by Hollande’s call for renegotiation of the fiscal treaty – an idea Merkel has ruled out – but it is unlikely that sparks will fly. In fact, the proposals Hollande will bring to Berlin are more modest than initially suggested. He has affirmed his support for all provisions in the existing treaty, quietly dropped a demand for euro bonds (anathema to Germany) and indicated he will be willing to give ground (possibly by jettisoning his demand for a more interventionist ECB) if he gets his way on his cherished “growth compact”.

The pro-growth measures he will outline in a memorandum to EU leaders this week are reiterations of ideas that have already been discussed at EU level, and none of the four – project bonds, a boost in funding for the European Investment Bank, a financial transaction tax and reassigning money from structural funds – has been rejected per se by Germany.

The term “renegotiation” looks like something of a misnomer: there is no Hollande plan to unpick the fiscal treaty, and his Europe adviser, Catherine Trautmann, says the growth measures could be addressed in a protocol, a regulation or even a political decision. This should give Paris and Berlin at least the basis for a compromise.

Despite a real will to avoid unnecessary tension, however, the two capitals have one banana skin to avoid: very different political, economic and semantic understanding of the word “growth”, and how best to achieve it.

Berlin recoils from the idea of forcing growth by pouring in money that has been bought on credit. Instead, it emphasises growth through structural reform and strengthening competitiveness through debt control – quite different to the Keynesian stimulus-based ideas that inform Hollande’s manifesto pledges.

The challenge for Merkel-Hollande is to come up with a combination of words that gives their respective electorates what they want to hear, while being palatable to EU partners and credible to financial markets.