Merkel and Sarkozy say EU states must work together


GERMAN CHANCELLOR Angela Merkel and French president Nicolas Sarkozy have said the EU needs to act together as an “economic government” to prevent a recurrence of the euro-zone crisis.

Crucially, Mr Sarkozy agreed after talks in Berlin yesterday that the “economic government” would not involve creating a new EU institution, as he wished, but would instead use existing structures bringing together all 27 member states.

Until now, the French leader had pushed for a new “secretariat” to oversee euro-zone members. Dr Merkel, anxious to prevent what she called “first- and second-class EU members”, blocked his wish but agreed in return that she could live with special meetings of euro-zone members “if the need arose”.

“This is the only way we can bring forward, with the weakness that we still have,” said Dr Merkel after their bilateral talks.

For months, the growing euro-zone economic crisis has put pressure on the increasingly strained Paris-Berlin axis. The antipathy spilled out into the open last week when, after a bilateral meeting was cancelled at the last minute, each side blamed the other.

In an hurried show of unity, the two leaders penned a joint letter to the European Commission, urging it to speed up efforts to regulate EU financial markets.

Ahead of yesterday’s meeting, French finance minister Christine Lagarde insisted that a new EU structure was essential to enable “close oversight of the competitiveness of every member state as well as competitiveness gaps between members”.

She added: “The logical consequence of this is an economic policy that allows the even out of competitive differences, to harmonise economic policy with the possibility of mutual off-setting.”

Ms Lagarde declined to specify what she meant by economic harmonisation. She refused to be drawn, too, on whether Paris wanted any new secretariat to oversee the entire 27-member EU or just the euro zone.

This exposes the clash of economic cultures hindering agreement: in France, growth is traditionally a result of consumption and debt while, in Germany, the economic tradition is coloured by strong exports and keeping spending and wages in check.

“Both sides insist their model is best and both sides have allowed things continue along this confrontation course, with the tone becoming very harsh,” said Dr Claire Demesnay, Franco-German analyst at the German Council on Foreign Relations in Berlin.

“Germany has probably been a bit worse because it was hit the least by the downturn and is feeling confident in itself.”

Beyond the political differences are huge character differences between Mr Sarkozy and Dr Merkel.

To his friends, Mr Sarkozy reportedly belittles Dr Merkel as a “thinker” and himself as a “doer”; Dr Merkel’s friends meanwhile apparently delight in her mocking imitation of Mr Sarkozy’s dynamism.

Franco-German observers said that while personal antipathy has spilled over into the political sphere, yesterday’s compromise arose from the realisation that, regardless of their differences, Germany and France have to find a compromise. Yesterday’s meeting was about just that.

Mr Sarkozy got his “economic government” but in name only; Dr Merkel agreed to allow special meetings of euro-zone members, but only “if the need arises”.

German politicians are optimistic that, despite sharp differences of opinion of late, a common Franco-German position is still possible ahead of this week’s EU summit.

“This isn’t about who is of what opinion but rather, Germany and France have to be of one opinion, otherwise Europe is sick,” said Andreas Schockendorff, a foreign policy spokesman in Dr Merkel’s ruling Christian Democrats.

“Germany and France will find a common position and Europe will recover.”