AS THE last notes of La Marseillaise fade in Berlin this evening, Angela Merkel will hustle French president François Hollande past a military guard and into the mint green expanse of her chancellery.
The French national anthem was composed 220 years ago in Strasbourg to rally troops against the Prussian enemy across the Rhine, a “tyranny that raises its bloody banner . . . to return us to the old slavery”.
There’ll be no historical unpleasantness when the two leaders go before the press after dinner. The leaders will be at pains to demonstrate that all is running smoothly in Europe’s Franco-German engine room. Like their predecessors, Dr Merkel and Mr Hollande know they are doomed to succeed, though the euro zone crisis leaves little time for getting-to-know-you niceties.
Each leader faces contrasting political challenges. Mr Hollande’s post-inauguration dinner date is his first rendezvous with political reality after an election campaign of expensive growth promises. His host, meanwhile, is still wincing from a regional slap in the face from voters for her party’s austerity-first policies. In their first talks as political equals, Dr Merkel and Mr Hollande are aware of each other’s red lines: ahead of next month’s parliamentary elections, the French president cannot be seen to retreat too quickly from his promise to present growth measures to balance out austerity efforts. Dr Merkel’s no-debt line on economic stimulus, meanwhile, mirrors Henry Ford’s famous approach to car colour: you can have as much economic stimulus as you like as long so long as it’s free. “Nobody on our side has anything against growth, the question is what effect does it have on budgets?” remarked Dr Merkel yesterday.
Mr Hollande, sensing the lady is not for turning, has softened his growth rhetoric and made four growth proposals comprising old and new ingredients – none of which are explicitly opposed by Berlin. Germany backs Mr Hollande’s idea to reassign unused EU funding to stimulate growth and will support a topping-up of the European Investment Bank to help businesses – if all European neighbours chip in their share of funding.
Like Mr Hollande, Berlin favours a financial transaction tax at EU 27 level but, in case of problems, has started parallel talks about a slimmed-down levy along the lines of Britain’s stamp duty on shares.
On Mr Hollande’s fourth proposal, so-called “project bonds” to raise private funds for public investment projects, Berlin’s support depends on bonds having a full guarantee of the issuing state to protect against default – a crucial, technical distinction in German eyes. In this fast-moving crisis, the greatest political challenge to Dr Merkel’s no-growth-by-debt doctrine is no longer the French leader but her political opponents, the Social Democrats (SPD). Flushed with Sunday’s success in North Rhine-Westphalia, where voters backed the state SPD’s deficit stimulus programme, SPD politicians in Berlin have vowed to replicate that demand at federal level. This morning they will present growth proposals in Berlin. Already they are holding Dr Merkel to ransom in the Bundestag, withholding their support for the fiscal treaty until she agrees to growth measures worthy of the name.
Yet it would be a mistake to overestimate the significance of the NRW vote in Germany’s federal system, just as it is a mistake to underestimate the wily Dr Merkel.
Like her party, the German leader is well ahead in the polls; she has over a year to re-election and remains as non-ideological and pragmatic as they come. For all her tough talking, Dr Merkel is no stranger to deficit stimulus: she reacted to the 2009 financial crisis with a growth programme equivalent to 1.6 per cent of gross domestic product – almost all in borrowed money – that saw the federal deficit leap by 20 billion to over 80 billion.
Since the new year, Dr Merkel has sensed a change in the air and has begun to lay the rhetorical groundwork towards austerity-plus-growth measures.
“There is no contradiction between solid budgetary policy and growth,” she said yesterday. After the demise of Merkozy, this evening’s Merkollande debut will be a balancing act in political pragmatism.
