Hollande's France emerges as key Irish ally

Sat, Oct 20, 2012, 01:00

France is at odds with Germany over debt and banking issues of key Irish concern

IT’S HARDLY a trade secret that when European politicians gather around the summit table in Brussels, they act with a keen ear for domestic political reverberations.

But François Hollande broke an unwritten code on Thursday evening when, arriving for his second summit as French president, he suggested openly that German chancellor Angela Merkel was delaying moves towards a European banking union because she faced an election at home next September. It was one of the lowest points in the Franco-German tandem since the debt crisis erupted, and set the tone for a long, tense meeting that ran into the early hours.

Friction between French presidents and German chancellors is nothing new; postwar history is filled with examples of leaders in Paris and Berlin who got off to a poor start only to gravitate ever closer to one another the longer they were in power, as if the relationship exerts a pull they all find hard to resist. Merkel and Nicolas Sarkozy, Hollande’s predecessor, followed the same trajectory and became close allies.

But that didn’t make it any less striking to observe the diametrically opposed positions that France and Germany brought to Brussels this week, nor the ice-cold body language between the two leaders themselves. Not only did Hollande accuse Merkel of being too preoccupied with her own re-election, he noted that the chancellor had “her own deadline, in September 2013”.

He also put himself firmly at odds with Berlin by repeating his call for debt mutualisation as part of the solution to the crisis and rejecting tighter political integration through a new EU treaty any time soon. Across the Rhine just hours before she departed for Brussels, Merkel for her part endorsed the idea for an EU currency commissioner with powers to veto national budgets that breach EU fiscal rules – and, alluding to Paris, added that she was “astonished” at how others shot down such proposals without debate.

When the summit session finally ended just after 3am yesterday, the conclusions – as ever – contained enough for both Berlin and Paris to claim some sort of victory. The French president told reporters he had managed to win from the Germans a timetable for establishing a new European banking regulator – a notion Berlin had previously resisted – while Merkel could point to the vague nature of that timetable (“in the course of 2013”).

The new supervisor will cover all 6,000 euro zone banks (a French demand), but there will still be a role for national authorities in regulating banks, as per Germany’s wish. It was, said the French newspaper Libération, “an alliance of reason”.

For Ireland, the current divisions between Germany and France have had a clear effect. As Hollande has put distance between Paris and Berlin, he has pivoted closer to Dublin’s positions and emerged as a key ally of Taoiseach Enda Kenny.

Since his election in May, Mr Hollande has widened France’s circle of confidantes to include Spain and Italy, whose interests currently overlap with Ireland’s on a number of important issues.

And with Paris stressing that virtuous states should not be punished with unjustifiably high interest rates, Dublin has found a more sympathetic ear in Paris since the handover at the Élysée Palace. It has helped that talks on a new seven-year EU budget will culminate soon, and that France sees Dublin as a like-minded friend on the Common Agricultural Policy.

The new alignment was clear in Brussels this week. Whereas Germany was sending decidedly cool signals on whether the European Stability Mechanism rescue fund should bear so-called “legacy” debt, French sources were unambiguously of a different view. “The discussion we must have is to guarantee the retroactive effect of this, which is very important vis-a-vis the markets,” said a senior French official in yesterday’s early hours.

Not coincidentally, Kenny will pay his first official visit to Paris on Monday to meet Hollande at the Élysée – a clear signal of how Dublin is cultivating a key ally at a delicate time. Much less clear is whether that support will be enough to push an Irish debt deal over the line.