Before becoming president of France, Francois Hollande didnot appear to take much interest in the European Union. Compared with NicolasSarkozy, Hollande has been less hostile to EU institutions, more willing towork closely with South European states and, most crucially, keener todemonstrate that France does not slavishly follow German wishes.
A recent round of conversations with officials in the ElyseePalace and the finance and foreign ministries made clear that Hollande knowswell that a strong Franco-German relationship is indispensable to sorting outthe problems of the eurozone in particular and the EU in general. But Hollandewants a more balanced relationship. They emphasise that the “Deauville model”of Paris-Berlin relations “ in which Chancellor Angela Merkel persuaded Sarkozyto accept a policy and the two would then impose it on reluctant fellow leaders“ has been scrapped.
Instead, the new president has sought to strengthen France’sposition in a number of ways. One has been to consult other countries “especially Italy and Spain “ and the European Commission on key issues. Sarkozyavoided getting too close to Southern Europe, lest the financial marketsassociate France with their problems. Hollande does not have that hang-up.
Hollande’s second way of strengthening French influence hasbeen to retain the austere fiscal targets that he inherited, notably bylimiting the budget deficit to 3 percent of gross domestic product in 2013.Government officials said that while the current emphasis is on shrinking thedeficit through tax increases, in future years spending cuts will predominate.Thirdly, France intends to improve its competitiveness. Outside France,Hollande and his ministers are not perceived as being particularly committed tostructural economic reform. But the officials in Paris said the government wasdetermined to reform labor markets. And if the result is street protests? Hewill stand firm, they insist.
After a rocky start with Merkel, Hollande’s advisers say henow has a good working relationship with her. The mercurial Sarkozy and thecautious chancellor were not natural soul mates. Hollande tends to be aconsensus builder and soft-spoken “ like Merkel. French officials claim thatHollande helped persuade Germany’s leaders to shift some of their thinking onthe euro crisis. For example, Merkel and Wolfgang Schauble, her financeminister, have rallied behind Mario Draghi, president of the European CentralBank, in his scheme to intervene in bond markets to lower the borrowing costsof peripheral countries. The German government has also made clear that “ likeFrance “ it wants Greece to stay in the euro, for fear of the consequences of itsdeparture.
But tensions remain. The French support the EuropeanCommission’s proposals for an EU-wide system of bank supervision that wouldcover all Europe’s banks; the Germans want only the largest, cross-border banksto be covered. Furthermore, the German government is counseling Spain not toactivate the Draghi mechanism to intervene in bond markets; the French believethat the mechanism must be used soon, lest the financial markets cease tobelieve in its potency.
There is also a huge distance between Paris and Berlin onlonger-term issues of eurozone governance. The French worry about theincoherence of the way the euro zone is managed. They want the Eurogroup (theregular meetings of euro zone finance ministers) to provide some of the missingleadership by appointing a full-time president and introducing majority voting.Germans worry that a stronger Eurogroup could erode the independence of theEuropean Central Bank. The EU’s priority, the French believe, should be fixingthe euro: The 17 that use it should agree on whatever arrangements arenecessary and then allow others to sign up.
Despite their wariness of political union, French officialsdo recognise the need for greater democracy and accountability at euro zonelevel. The people around Hollande and Finance Minister Pierre Moscovicicriticise the European Commission and the European Parliament less viciouslythan Sarkozy’s people did; they accept, albeit reluctantly, that the Commissionmust play a role in supervising the economic and budgetary policies of eurozone states. In general, Hollande’s relatively communautaire approach puts himcloser to traditional German thinking than to Gaullist thinking.
So far, Hollande’s new approach to Germany “ working closelywith it, but not following slavishly “ seems to have been moderatelysuccessful. But if he wants France’s influence in the European Union toapproach Germany’s in the long run, he will have to deliver on his promise toboost the competitiveness of the French economy.
Charles Grant is directorof the Center for European Reform
