Should Merkel be scared of Hollande?


Looking at some of the most radical notions in some speeches of François Hollande, who is now actively fishing in the basin of the French left, one could have a clear flash of ‘déjà-vu’, as it resembles pretty much François Mitterrands ideas back in 1981. Six weeks of vacation and retirement at 60 were already in vogue back then.

The nervousness seems to grow in Berlin because the French elections and their likely outcome – a French president called Hollande – would heavily impact German plans with respect to the next steps in the euro-crisis management, especially the vote and implementation of the fiscal compact and the ESM. The possibility of Sarkozy u-turning the devastating trend that has been unfolding against him in recent days is highly unlikely. Hence, Berlin is busy preparing a combined vote of the fiscal compact and the ESM in the Bundestag by the end of May. The aim is to have it ready before the EU Council in June bearing in mind that the French could possibly derail the complete process.

The old French wraith seem back: attacks on the ECB, debt finance investment, wealth tax. It sounds all so familiar, especially looking at Jean-Luc Melenchon's classic left discourse and his surprising catch-up in the presidential campaign. And it may come as a surprise to many in Europe but he may even come out third in the first round. Interestingly, classic socialist rhetoric is still a prominent element in French politics as Sylvie Goulard points out.

Markets are not amused either, which obviously is not a problem, but it is still a fact. The uncomfortable truth is that the French economy is structurally in a very bad shape. Deep reform has been delayed for too long and short term spending efforts will not help kickstarting the economy in any sustainable way. France lacks good structural policies in education, innovation, R&D, research clusters or a healthy system to support small and medium-sized enterprises.

Thus, the question is whether, once elected, François Hollande will be inspired by François Mitterrand’s politics of Etat de Grace: It was in fact François Mitterrand who pushed through the politics of competitive disinflation, arguably the most conservative economic policy in France. Mitterrand performed a remarkable u-turn in March 1983, where he decided between Chevènement and Delors and agreed to a deflationary package.This was crucial to keep France on the European tack and can be seen as an essential condition for today’s monetary union.

The other option is that the French socialists do in fact aim for a confrontation with Germany about the economics of the Euro. Here, it will be interesting to see the how the German SPD will react taking into account the likes of Steinbrück and Gabriel.

Nevertheless, there are two main reasons why Hollande could be a dynamic factor for the future of Franco-German relations. Not many things across Europe are hated as much as ‘Merkozy’ so a change here might actually be for the better. First, historical evidence suggests that the ‘raison-d’état’ factor in Franco-German relations (meaning the necessity for France and Germany to work together at any price) always takes precedent over party affiliations. Giscard d’Estaing and Helmut Schmidt, Helmut Kohl and François Mitterrand are the most prominent examples for this phenomenon.

Second, on institutional matters, the French Socialists seem much closer to how most German parties, including the CDU, want to develop and democratize the EU system: e.g. direct election of the president of the EU, strengthening the role of the European Commission and the European Parliament.

All these things have been mentioned at PS events - and key advisors such as Elisabeth Guigou, the new special European advisor of François Hollande and former European minister of François Mitterrand, suggested similar things. On the other hand I sometimes wonder whether UMP politicians actually know about the existence of the EU Commission or the EP. So most German ideas about the institutional development of the EU and closer political integration, let alone the perspectives of political union, have more chances to be realized with the French socialists.

Beyond these two reasons, it was precisely the symbiotic manner of the ‘Merkozy’ relationship that distorted the function of Franco-German relations for Europe as other countries no longer felt included. In other words: Franco-German relations work best, if and when the two quarrel. Let alone the fact that much of this Merkozy-symbiosis must seem hypocritical, looking at Sarkozy’s most recent allegations on either Schengen or the ECB.

It is very likely that France and Germany will be quarrelling a lot after the election: on the status of ECB or about the role of the European Investment Bank (EIB). Especially the EIB might leave its shadow-existence, as there are French ideas that it should increase its lending capacity. Moreover, we might see debates on a European unemployment assurance or European employment measures. All these proposals are said to outbalance the German path of austerity. And it may well be that the French socialists will get a lot of support from other EU countries and players.

French people love to strike à la rentrée and it cannot be ruled out that France goes to the streets like in 1995 - which led, more than a year later, to early parliamentary elections and a left majority in the Assemblée nationale. Lionel Jospin became the new prime minister - and the Stabilty Pact became a Stabilty and Growth Pact. 

And it is also worth mentioning that France will not only vote for a new president, but also for a new parliament in June. Even if the Assemblée National is not as powerful parliament as the German Bundestag: a socialist majority would give amplitude to François Holland’s ideas for more growth and social justice, which may well resonate beyond France’s borders

However, independently on whether one is a full-hearted Socialist and even if one is not convinced of the political cleverness of a 75% wealth tax, there is no reason for Angela Merkel to be scared of François Hollande. On the contrary, Franco-German relations could indeed be peeking again, just it time for the festivities of 50th Birthday of the Elysée Treaty in January 2013 by promoting precisely the European compromise between austerity and growth that large parts of Europe are waiting for. After all, the quality of Franco-German relations was always about finding the right balance for Europe and that’s what is at stake now. Even if this will take some harmful and nasty Franco-German arm-wrestling, the result could still be good for Europe.

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