France and Germany are setting tongues wagging. Despite the celebrations at Ludwigsburg last week,where Angela Merkel and Francois Hollande did a great job making the Franco-German relationship look good on the occasion of the 50th anniversary of General de Gaulle’s speech to German youth, the general tone in Berlin is one of a certain irritation when it comes to France and the state of Franco-German relations.
The Germans, in short, are wondering about two things: Firstly, whether France will carry out its structural reforms. Most Germans probably welcome Nicholas Bavarez’ new book “Réveillez-vous”, in which the author makes an urgent case for the need for France to reform its economy deeply, and tries to wake France from its attitude of economic exceptionalisme . However, it’s not only the French economy that seems in deep trouble: France’s economic choices under François Hollande seem cryptic to most Germans. The general economic orientation seems unclear (or at best paradoxical) between the clear commitment to reduce the budget deficit down to 3% by next year, and the intention to introduce a wealth tax or to create (old recipes) jobs in the public sector. Germans also understand that Hollande is having a hard time processing reforms whilst France’s socialist left, under the intellectual leadership of Jean-Louis Melanchon, remains vigorously opposed to austerity policy imposed by Germany(while Germans would rather argue that it is being imposed by global markets). Germans are therefore curious to see how France’s reform path will unfold over the next month.
Secondly, the Germans are wondering when France will start listening to (and answering) the German discussion about political union. Germans have understood that France is still hoping for Eurobonds – within the next five years – as French Finance Minister Pierre Moscovici recently restated in London – and Germans are trying to argue that these will not be ‘for free’ but require a different set up of European democracy.
In this respect, it was interesting to listen to Karine Berger, a member of parliament for the French Socialists, this week at a conference on European democracy and the way out of the crisis organised by the Heinrich Böll Foundation. In a panel discussion, Mme Berger stated repeatedly that she does not believe the euro has much chance of surviving if the eurozone does not ultimately enter a debt community and create Eurobonds. In essence, I agree. She said that if this does not happen, there would not be a common solution to the euro crisis. For the rest of the world, Mme. Berger continued, the currency union wouldn’t exist anyway, as interests rates vary greatly again. If there is no debt community, there is no budgetary union and the euro would be finished. However, a budgetary union cannot exist without parliamentary control. Europe cannot take parliamentary control over budgets away at the national level and give it to non-parliamentary (and therefore non-democratic) institutions on the European level. So far, so good, and again I agree. But then the discussion touched on the point of the current Franco-German misunderstanding: when the moderator questioned her deeper about European parliamentary control, she answered that, indeed, the right of the EP to oversee the budget must be strengthened – but she meant the EU budget.
Germans however, are currently having a discussion on the topic and are mostly arguing that a debt community would necessitate common parliamentary control on the European level (however this might be organised), about national budgets, including, as van Rompuy’s report on a genuine banking union also requests, the introduction of a ‘budgetary ceiling’ which ought to be under European and preferably parliamentary control. This is probably also what ECB president Mario Draghi meant by the condition of ‘budgetary oversight’ that he mentioned in his speech in Berlin this week at the Annual Conference of the German Industrial Association, BDI, though he did not provide an answer as to how this could and should be organised. Germans are having an intense discussion about how it could be organised. One idea is to create a Eurozone parliament, which would satisfy the requirements of parliamentary legitimacy and therefore qualify as a body for collective decision-making on both the discretionary spending of the Eurozone and the oversight of national budgetary ceilings. French ideas on this would be welcome, but they would need to go beyond strengthening the rights of the EP concerning its own budget.
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