Quid pro quo

It's time for Germany to heed France's call for reform

germany france partnership reciprocation
They get along great, except when they don’t. Source: Reuters

France’s president quotes Goethe. His press secretary has translated Friedrich Schiller into French. The prime minister graduated from high school in Bonn. The finance minister was awarded the German Cross of Merit, first class, for his commitment to the Franco-German friendship. And his chief diplomatic advisor was previously an ambassador in Berlin.

Emmanuel Macron has set an example by concentrating expertise on Germany among his closest advisers and within the top echelons of his government. So far, there has been no equal response from Berlin. The new cabinet has searched in vain for proven experts on France. Chancellor Angela Merkel continues to surround herself with advisers who — to put it mildly — are iffy on France. Her new finance minister, Olaf Scholz, is not exactly a committed Francophile. Paris’ fiscal policy was lax for a long time and has led to deep-seated mistrust in Berlin.

It remains to be seen whether the new minister can and will overcome this, but Mr. Scholz is not completely clueless when it comes to France. The former mayor of Hamburg was the federal commissioner for German-French relations for a few years, after all. So that’s a start.

The French president has made overtures to Germany, in both personnel and policy. Unlike his predecessors, he seriously addressed the restructuring of public finances and other unpopular changes at the beginning of his term. Mr. Macron unceremoniously dropped the old French demand for euro bonds, a bone of contention between Berlin and Paris for years. And he is no longer calling so urgently for a European finance minister, a central topic in his election campaign.

The existence of the single currency is still at stake.

Paris has made concessions. But whether the new government in Berlin will do the same is not that certain. Although Merkel and her ministers are constantly talking about “rebooting Europe,” they have yet to provide actual political content. The Franco-German position paper on the future of the euro zone, long promised and repeatedly postponed, is still being prepared in Berlin. The chancellor had last promised it for March, but it still hasn’t materialized. Now it’s expected to arrive in time for the crucial EU summit in June. We’ll see if that happens, but a substantial joint paper will only be on the table if both sides make compromises — including Germany.

The German government will have to move on EU deposit insurance, for example. It is not a matter of creating a fully communal EU savings fund, which France and Germany equally oppose. In a banking union, however, national deposit insurance schemes should at least help each other with loans in the event of a crisis. These are repayable and have nothing to do with joint liability. Savings banks and local cooperative banks could certainly cope with this.

Yet the dispute over deposit insurance threatens to paralyze the euro zone. Behind the scenes in Brussels, experts from the member states have been struggling for weeks to set limits on risks in bank balance sheets. The dispute could be ended or at least defused by limiting the deposit insurance scheme to repayable liquidity support and by renouncing joint liability. Germany and France must do this together, because they are uniquely qualified to foster the euro zone.

germany france partnership, la maire and scholz
Still working on that French-German partnership. Source: AP

The 19-nation currency bloc is drifting dangerously apart politically. A group of eight northern and eastern European countries led by the Netherlands is now refusing to show any solidarity with the highly indebted southern European members of the euro zone. In Italy, euro-skeptic parties won an election. They’re demanding more help and solidarity from European partners and are threatening to withdraw from the monetary union. Germany and France are caught in the middle, and they can only hold the centrifugal forces together if they work together.

The existence of the single currency is still at stake. Low interest rates and a strong economy have merely covered up the weaknesses of the euro zone. They will reappear in full in the next crisis.

It’s in Germany’s best interest not to let Mr. Macron’s European ambitions come to nothing. The far-right Front National is just waiting for the president to fail, as his predecessors did. We must not forget the strong sense of relief Berlin felt after Mr. Macron’s election victory last spring. Those who do not want to make concessions to France should take a look around the other large EU countries. Berlin no longer has a reliable partner in London, Warsaw or Rome. But we’ll always have Paris.

To reach the author: berschens@handelsblatt.com

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