French president feels the heat as Berlin exerts dominance and angry electorate bides time

THE WEIGHT of relentless crisis management weighs heavily on the shoulders of European leaders, as the drawn, sober faces arriving for last night’s summit showed.

However, while the spotlight has focused this week on the euro zone’s sickliest member (Greece), its largest paymaster (Germany) and the source of its latest jitters (Italy), it was French president Nicolas Sarkozy who may have been feeling some of the greatest pressure.

Sarkozy is an enthusiastic summit player. In Paris, his default preference for gathering people around a table, no matter how big or small the issue, and keeping them there until differences can be hammered out is a running joke.

They bring out the best and the worst in him; on the one hand, he has a stage to deploy his irrepressible energy and a gift for cajoling, persuading and imposing his view to good effect. On the other, these tense, high-pressure meetings bring to the fore those qualities that exasperate colleagues – his impetuousness, temper and mercurial streak.

As last weekend’s confrontations with David Cameron and Silvio Berlusconi showed, and as Dublin learned during the corporate tax stand-off, he has a tendency to home in on a target and lash out.

Behind the French president’s irritability is deep French unease about its role in the current crisis and its standing more widely. For Sarkozy, this is arguably the most critical week of his presidency.

From the outset, the euro zone crisis has highlighted a shift in the balance of power within the Franco-German relationship that has driven European integration. Berlin’s clear dominance in efforts to end the debacle are reminding Paris at every turn of the perennial link between economic and political clout.

While Germany has resisted the worst of the slowdown and become the benchmark for fiscal prudence, France has been under constant pressure.

Unemployment is high, its banks are heavily exposed to the debt of struggling southern economies, it has not balanced a budget in 35 years and now its cherished triple-A credit rating is in jeopardy.

As so often in the history of the European project, the French president and the German chancellor have a symbiotic relationship. But lately, France’s need to attach itself to its neighbour has been the greater. Notwithstanding their mutual dislike for one another, Sarkozy never tires of talking up his close working relationship with Merkel. They have spoken by phone almost every day over the past fortnight and Sarkozy has flown to Germany twice in the past seven days. Just yesterday the French government’s spokeswoman spoke of the “crucial role of the Franco-German axis in the resolution of the euro zone crisis”.

Paris got its way in pushing for closer co-operation between euro zone states, a stage that amplifies French influence by sidelining Britain, Poland and other large states outside the single currency area.

On a series of major substantive debates over the past week, however, France has ended up on the losing side. Concerned that having to inject sovereign funds into its banks would further threaten its credit rating, Sarkozy wanted states to be able to seek money from the European Financial Stability Facility rescue fund before the supply of state aid expired.

Merkel shot that down, insisting the rescue fund could be used only to inject money into banks as a last resort.

In view of its banks’ exposure to Greek debt, France then pressed for the lowest possible haircut for investors; again it lost the argument to Germany, the Netherlands and Finland, which would have to bear a heavy share of the burden for future bailouts.

The “voluntary” losses under discussion yesterday were in the region of 50 per cent – more than double what was agreed between euro zone leaders in July.

Another area of tension between Paris and Berlin was over the role of the European Central Bank. Sarkozy wants deeper and heavier ECB involvement, and reports suggested an early draft of the summit conclusions called on the central bank to continue its purchase of bonds of distressed states. This was dropped after Merkel intervened – another rebuff for Paris.

The net effect of these disputes is that France, on some major issues, finds itself in a position where it is siding not with the five other triple-A states in the euro zone but with the troubled southern economies.

With a presidential election just seven months away, a halting economy and the perception of diminished influence are terrible news for Sarkozy. It got worse last week with a spike in French bond spreads over German bunds – to their highest level since the euro was created – and an announcement by Moody’s that it was examining the outlook on France’s triple-A rating.

“Over the next 10 days, our destiny is all to play for,” Sarkozy said last week.

The EU’s destiny, but also France’s and his own.