Francois Hollande Has Destroyed German Dominance in the EU

President Francois Hollande of France and Chancellor Angela Merkel of Germany may have exchanged kisses on the cheek this Sunday in Reims, France, to celebrate the 50th anniversary of their nations' historic postwar reconciliation, but in statements made by the two leaders in advance of the event, they are far apart indeed on the present and future of European unity, according to analysis by the German magazine Der Spiegel

Where Merkel praised the strength of France and Germany acting in concert, Hollande in contrast warned that “we should not understand our relationship as a directorate, in which France and Germany alone decide for Europe.” 

“Sometimes certain countries can feel excluded or forced to accept a compromise that has already been brokered by both of our countries,” he said, a stance the magazine characterized as a clear departure from the previous EU policy of “Merkozy,” the name given by the press to the duo of Chancellor Merkel and Hollande’s predecessor, Nicholas Sarkozy.

As the Spiegel piece notes, at the most recent EU-summit in Brussels last month, Hollande supported the Spanish and Italian governments in their faceoff with Merkel, which resulted in the agreement on a €130 billion package to finance growth projects in the EU, new rules allowing bailout funds to be used to bail out banks directly, without the amount showing up on governments’ books (a major relief for Spain) and the allowance that countries pursuing deficit reduction can access bailout funds without additional austerity measures. NPR’s Eleanor Beardsley even describes Hollande being celebrated in France as a victor against Germany for “behind the scenes … pushing to change the dynamics, to change it from France and German controlling everything to have this sort of alliance of countries to put pressure on Merkel to do some other things than simply enforcing austerity.”

Commentators are not united on who the real victor in Brussels was. Writing in the Financial Times, Wolfgang Münchau argues that it was Merkel who carried the day, noting that the mandate to inject equity into the banks will be conditional on an agreement for a joint EU banking supervision that will not likely come easy, and that lending capacity of the European Stability Mechanism has not changed and remains insufficient. Germany’s liabilities are unchanged; while Hollande and Italy’s Prime Minister Mario Monti support collectivizing European debt in the form of Eurobonds in order to lower the borrowing costs for countries such as Italy and Spain, in Brussels Merkel reiterated her opposition and even declared that there will be no Eurobonds in her lifetime.

So, the demise of Merkozy has not exactly been the complete sea change that might have been imagined this spring, when it seemed for a moment Merkel might be boxed in on the issue of Eurobonds by Hollande on the one side and by the opposition Social Democrat and Green parties in the German parliament on the other (The opposition subsequently moved away from this position just weeks after Hollande defeated Sarkozy for the French Presidency). But it does seem to have wrought some significant changes in the form of a euro zone in which nations beyond the Franco-German fulcrum at least feature prominently in deciding the next steps forward for the troubled economic block. The question, as ever, is whether those steps are significant enough to alleviate the misery of the crisis-stricken currency zone.