The Creaking Axis?

French President Nicolas Sarkozy is due to unveil France's plans to amend the EU Treaties and make yet another step towards his cherished gouvernement économique for the eurozone in a keynote speech on the state of French economy this evening (which we will follow live on Twitter @OpenEurope). However, German Chancellor Angela Merkel isn't expected to show her hand until tomorrow, at least according to what French Economy Minister François Baroin said (which could contain proposals we highlight here).

Say what? Only one week ago, during the joint press conference with Merkel and Italian Prime Minister Mario Monti in Strasbourg, Sarkozy announced,

"In the forthcoming days, France and Germany will put forward common proposals to amend the [EU] Treaties in order to improve [economic] governance in the eurozone and increase the level of integration and convergence of economic policies."

So why has 'Merkozy' eventually decided to make proposals separately? Well, according to reports in the French press today, the reason is that Germany's plans (or at least what has been leaked so far, which we discuss here) are too far-reaching for France's taste. As French Budget Minister Valérie Pécresse explained to the press yesterday,

"What we want is greater budgetary discipline, but a budgetary discipline enforced by the states, with a real participation by national parliaments. This question of sovereignty does not arise for us."

She went on,

"We want a règle d'or [golden rule, i.e. a deficit brake in the Constitution, in French political jargon]...which binds the states, but is adopted by national parliaments...It is in the full respect of its sovereignty that France wants to stick to its commitments on deficit and debt reduction."

Madame Pécresse's words are a perfect illustration of how - when you scratch the surface - deep the divide is between France and Germany's ideas of how stronger economic governance in the eurozone should be achieved. So how important are these divergences, emerging only a few days ahead of a make-or-break EU summit?

Sarkozy is, after all, a Gaulliste (General Charles de Gaulle triggered the well-known 'empty chair crisis' in reaction to the introduction of Qualified Majority Voting in the then European Economic Community). Hence, he could only support stricter supervision of national budgets if governments are allowed the last word on key decisions, especially when it comes to sanctions. In other words, giving the Commission (or the ECJ) the power to enforce budgetary discipline directly on eurozone countries is a non-starter as long as Sarko remains the occupier of the Élysée.

And the French Socialists aren't too keen on the idea of involving EU judges either. François Hollande, the Socialist presidential candidate, said yesterday at a press conference in Brussels,

"I will never accept the fact that, in the name of control over national budgets, in the name of budgetary policies coordination, the European Court of Justice can be the judge of the expenses and revenues of a sovereign state."

Oh-la-la! But there's more,

"Europe's [economic] revival can't happen without a project. Now, sanctions and authoritarian policies are not a project."

And also,

"When Mrs Merkel demands that the Bundestag be convened ahead of the European Council, I respect this procedure. But I want the choices made by the French people to be respected too."

Needless to say, this makes things extremely interesting, not least in light of next week's meeting of EU leaders as Germany is unlikely to agree to the ECB intervening or even to a leveraged EFSF in the absence of much stronger supervision of national budgets and economic policies. But, just as for every single eurozone country, the question is: how much of its souveraineté is France really willing to give up in the name of Franco-German cooperation and, more in general, to save the euro?

It should be said, however, that we've been here many times before, with Berlin and Paris with different starting positions and then ending up with a common stance, which is then rolled out to the EU as a whole.

And let's remember the French do know how to play the diplomatic game...