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Tuesday, May 08, 2012

Hollande's victory is an opportunity for David Cameron to strengthen his position with German Chancellor Angela Merkel

In an op-ed for today's Telegraph, we argue:
"Viewed from London, the most interesting effect of François Hollande’s victory in Sunday’s French presidential elections may not be how it changes the UK’s relationship with France, or even how it could create tensions in the Franco-German axis. Rather, it is how it has the potential to strengthen ties between Berlin and London."
We note,  
"While the bickering between London and Paris will continue, Hollande simply rubs the Germans up the wrong way. His spending rhetoric is an outright challenge to German Chancellor Angela Merkel’s vision of a euro firmly grounded in Prussian budget discipline. Remember, this is a vision that has been presented as “non-negotiable” to the German electorate and which still draws support from a clear majority of voters there (only about one third of voters would prefer economic stimulus over austerity, even at home). Unsurprisingly, Hollande’s threat to veto the EU fiscal treaty – Merkel’s political cover for putting up German taxpayers’ cash – has caused dismay in Berlin and Frankfurt. As the German newspaper Die Welt put it: 'The fiscal pact is the best thing Europe has. Now it has come to an end even before its introduction. If it continues like this, that’s the end of the eurozone.'"

There may be plenty of empty election rhetoric in Hollande’s promises to take on Germany, and the most likely outcome is that Merkel and Hollande reach a deal on the fiscal treaty that does not involve outright renegotiation but that allows him to save face, perhaps by adding a fiscal stimulus clause, loosely attached to the treaty. The two have too much to lose from an almighty row. [But] at the same time, though, the Germans know that politics in the EU balances on a knife edge."
We go on to argue that,
"taken together, election results in 2012-13 could massively increase perceptions in Germany that either it is prepared – in the words of the German tabloid Bild – 'to stand alone' or accept being slowly but inexorably pushed into the arms of the spending- and inflation-prone Mediterranean bloc. Clearly, Germany wants neither. To escape this binary choice, it will need allies. And this is where Sunday’s election results really become interesting for Britain. With Berlin growing anxious, this is the perfect chance for No 10 to begin a concerted effort to lure Berlin in the direction of a more liberal, outward-looking Europe. Cameron won’t break the Franco-German axis – nor should he try to. But he could now create a lot of goodwill in Berlin by throwing his weight behind a Europe based on sound money and that lives within its means. As Merkel’s charm offensive following Cameron’s EU veto back in December illustrates, Berlin knows that it pushes Britain away at its own peril. Not only does it need the UK inside the EU tent to balance the less-disciplined southern bloc, London’s support will also be vital in upholding a rules-based system where goods and services can be traded across borders, as Europe goes through a highly unpredictable – and defensive – phase. A southern bloc led by Hollande may challenge austerity, but a northern bloc, containing the UK (if it can get its economy in order), the Scandinavians, and some of the new member states, would possess Europe’s economic fire power – and its Triple A ratings. Therefore, though it won’t be easy, the scope for a new bargain between London and Berlin – based on Britain needing new terms of EU engagement if it is to remain inside, and Germany needing the UK’s quiet support for a more economically sustainable euro – is possibly greater than ever.

So how should the UK respond? First, of course, get a working relationship going with Hollande – France remains a key partner and neither Britain nor Europe would be the same without it. Second, don’t give up on Spain and Italy – both governments contain plenty of good people who understand the need for structural reform. But in parallel, British EU diplomacy ought to be reoriented far more towards Berlin. Despite its importance, the UK far too often talks about the past or misunderstands Germany, as was made painfully obvious when Cameron thought he had Merkel’s support ahead of December’s EU council – a misunderstanding that triggered his veto.

A good place to start for the UK government would be to stop lecturing the Germans on the need for turning the eurozone into a debt union. Such lectures annoy Berlin in return for no apparent diplomatic benefit. What Britain can do, however, is set a good example by getting its own economy in order, while continuing to push for pro-growth and structural reforms at the EU level when this is within the UK’s mandate. And as Europe searches for cause and meaning, Britain can also set out an alternative vision for its place in the EU. While stressing the benefits of cross-border trade, such a vision should be based on the realisation that Britain cannot join the euro, and will therefore need a different – and looser – arrangement under EU law than euro members. This would provide a focal point for diplomatic relations with Germany in particular, but also other key allies that too often are left perplexed as to what Britain actually wants in Europe."
 We conclude - in a nod to those commentators who claim that Hollande's victory 'isolated' Cameron (whatever the event in Europe, the outcome is always that Cameron is isolated, have you noticed?):
"If Cameron can pull that off and cultivate relations with Berlin, Hollande’s victory – far from isolating the Prime Minister – may just have strengthened his hand."

5 comments:

Anonymous said...

This analysis massively overcomplicates the situation, which is:

1. Hollande is a Eurofederalist, and he will pick up where Sarkozy left off and even accelerate the Merkozy plan by insisting on Eurobonds, common fiscal policy etc. (Merkel's "resistance" to Eurobonds is cosmetic.)

2. This puts him squarely in line with Merkel and Cameron in propagatong and executing Eurofederalism.

The rest is just noise.

Anthony said...

You say:

"the outcome is always that Cameron is isolated"

It's not an outcome, it's a current situation, because Cameron has isolated himself. Out of the EPP, not in the Euro, opposing bailouts, talk - more or less credible - about an in-or-out referendum, what more do you need other than a giant v-sign sculpture on top of the White Cliffs of Dover.

The idea that Merkel and Cameron will form a pro-austerity, pro-business alliance against the socialists is pure fantasy. Maybe with a Britain that had had some engagement up till now, maybe with a Conservative party that had credibility on European issues, maybe with a Britain that had an honest internal debate on the role of the EU.

But not with the one we've got.

christina Speight said...

This analysis is not of this world, I'm afraid. It is more tinkering when radical surgery is needed. You say--- "Die Welt put it: 'The fiscal pact is the best thing Europe has. Now it has come to an end even before its introduction. If it continues like this, that’s the end of the eurozone.'"

Die Welt is right even if it doesn't approve. The ONLY solution for Europe's troubles is to kill the virus - the euro - not tinker with the cold sores. Until this action is taken all the rest is hot air. I'm pleased with developments as they can well speed up the [inevitable] solution and save everyone much pain ans money

It's no use looking to Cameron - nobody here or abroad trusts him with anything any more.

Klaus said...

As somebody who does not live in the UK (i.e. not experiencing UK internal political dynamics/perceptions etc. referred to by previous commentators)
but who follows the European and German political conext quite closely I would feel that there is quite a lot of truth in it.
There is definitely a window of opportunity for such a policy. If the UK government sees and, above all, uses the opportunity is another question;
would make sense though, for all parties involved. The German side is probably aware of the situation and should be more willing to go down this road than the "eurobond avenue".

Denis Cooper said...

Traditionally British interests have always lain in building a coalition against whichever continental power is seeking to dominate Europe, and at present that means Merkel's Germany far more than France.

The arrogance and hypocrisy coming from Berlin beggars belief.

Signed agreements can't be reopened?

What about the ESM treaty signed on July 11th 2011, official photographs of the signing ceremony here:

http://www.consilium.europa.eu/council/photographic-library?command=VIEW&BID=170&dateEvent=11/07/2011&rubrique=3736&id=&lang=en

which Merkel subsequently had reopened, primarily so she could insert her "blackmail clause"?

As admitted here:

http://www.consilium.europa.eu/homepage/showfocus?lang=en&focusID=79757

"The new treaty to create a European Stability Mechanism (ESM) was signed on 2 February by the eurozone countries' ambassadors in Brussels ... The treaty was originally signed in July 2011 but has now been modified to make the ESM more effective."