PARIS – It is customary for contestants in a decisive confrontation to thrust out their chests and flex their muscles in an attempt to impress each other. It is the art of psychological warfare. This is undoubtedly what governments on both sides of the Rhine have decided to do, as the next European meetings to save the euro loom later this month.
One must hope so, because the signals that French and German leaders are sending out aren’t the kind that foster serene discussion. In Berlin last Friday, Angela Merkel launched a full-scale attack on the French positions. The German Chancellor said President François Hollande’s fervently defended position of a mutualized debt through eurobonds “would lead Germany to mediocrity.”
She added that the real question was “the increasing differences between the German and French economies,” by which she meant France’s declining competitiveness. Two days earlier, her finance minister, Wolfgang Schäuble, sharply criticized France’s return to the 60-year-old retirement age.
France was not to be outdone. While Hollande hosted his friends from the German SPD opposition at the Elysée palace, the French minister for productive recovery downright lectured the German Chancellor, denouncing her “ideological blindness.”
“The solution isn’t budgetary cuts, it’s having an ECB (European Central Bank) that does its job,” declared the minister Arnaud Montebourg in an interview with Usine Nouvelle. “We want a central bank that reduces public debt, that finances growth while protecting purchasing power.”
Uncomforting words
These kinds of declarations, in contradicting basic economic logic, feed into German worries. Berlin suspects the French of wanting to have its cake and eat it too; in other words, of waiting for Germany to finance struggling countries’ deficits through debt mutualization without getting down to the painful yet necessary structural reforms for a healthier economy.
Similarly, in Paris, the possible delay of a Court of Audit examination until after the June 28 European Summit contributes to sowing doubt about the seriousness of France’s commitments to austerity.
The time has come to move on to a more constructive phase of the summit preparation. French Prime Minister Jean-Marc Ayrault and Economy Minister Pierre Moscovici have already started. Paris should pay closer attention to Germany’s genuine worries, and Madame Merkel needs to convince her public opinion that a compromise is in Germany’s interest.
Beyond the political decorum, one essential question remains: while Berlin needs to make efforts on debt mutualization and the role of the European Central Bank, Paris has to do the same on European federalism. One cannot happen without the other.
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Photo – robinhoodtax