EU reform

Berlin and Paris Lean Closer on Reform

French President Emmanuel Macron and Prime Minister Edouard Philippe pose for a family photo after the first cabinet meeting at the Elysee Palace in Paris
The new French government – Germany's new besties? Source: Reuters

France’s new president, Emmanuel Macron, may have had a promising first meeting with German Chancellor Angela Merkel already, but he’s hardly the only one who will need to establish close ties with Berlin in the coming weeks. Lucky for him, many members of Mr. Macron’s newly appointed government have close ties to Germany. Those connections just might help him push through an ambitious European reform package together with Berlin.

Prime Minister Édouard Philippe studied in the former West German capital Bonn, while his new chief diplomatic advisor Philippe Étienne was French ambassador in Berlin, and Mr. Macron’s ally Sylvie Goulard has close connections to the Christian Democratic Union and takes part regularly in television discussion rounds in Germany. The new general secretary in the presidential palace, Alexis Kohler, and the advisor on Europe, Clément Beaune, both have a good understanding of German and Finance Minister Bruno Le Maire is a known quantity in Berlin from his work with previous governments.

For Mr. Macron, working with Germany could mean breaking the deadlock on how to restructure the 19-nation euro currency union. His ideas include greater federalism in the euro zone, including a shared budget for public goods, an economics and finance minister and a euro zone parliament.

Germany is responding with Operation Macron. The goal is a reform that satisfies the French without scaring German voters too much. That in itself marks a change: So far, Berlin had tried to avoid this debate, fearing it will mean paying more and concerned, for example, about French calls for Germany to use its fiscal capacity to boost domestic demand, which would bring down its current account surplus. French leaders have made such calls in the past, but were regularly rejected. Former presidents like Nicolas Sarkozy and Francois Hollande “came to Berlin in an airplane and went home in a bus,” as one senior German official put it, with evident regret.

Now, though, the German government knows too much is at stake. If Mr. Macron fails, France could sink into chaos or fall to far-right populist Marine Le Pen and the Front National. Plus, Germany is happy with the current situation: its economy is booming and unemployment is the lowest since reunification. And so, in Berlin, there is no longer the desire or intention to keep just saying “no.”

Mr. Schäuble acknowledged that a currency union can’t work without some degree of “adjustment” between stronger and weaker countries.

But German politicians aren’t all singing from the song sheet: In a position paper, Foreign Minister Sigmar Gabriel offered to draw on funds reserved for handling German nuclear waste to finance a Franco-German investment campaign. The trouble was, no one had agreed on that proposal beforehand. The fallout: Germany’s finance ministry criticized that available funds hadn’t been used up yet. And Mr. Gabriel wound up being criticized even by his own Social Democratic Party. After three disappointments in state elections, and ahead of Germany’s federal election in September, many SPD members fear their new chancellor candidate, Martin Schulz, will suffer further if his party backs proposals that would obviously require Germany to spend more.

France is also skeptical about the German finance ministry’s ideas about how best to reform the currency union. German Finance Minister Wolfgang Schäuble has suggested expanding the European Stability Mechanism into an independent European Monetary Fund. Like the International Monetary Fund, it would monitor member states’ budget policies and provide emergency loans in crises.

But Mr. Macron’s advisors worry that the German finance minister simply wants to put even more pressure on highly indebted countries. They fear that he wants to disempower the European Commission, which so far has been responsible for budgetary supervision and tends to interpret the rules more flexibly than conservative Germany would like.

Now, in a bid for compromise, thought is being given at the Chancellery and ministries about how to expand on their ideas. Mr. Macron has proposed a common budget for euro zone countries and wants to make sure that if a crisis occurs, money would flow to those countries that then have less funds of their own available.

At the weekend, Mr. Schäuble acknowledged that a currency union can’t work without some degree of “adjustment” between stronger and weaker countries. But he argues that money should only be released when governments have reduced their debts, are willing to submit to European rules, and renounce part of their sovereignty in terms of budgetary policy. One model could be the common resolution fund set up two years ago for restructuring ailing banks. Germany only agreed to this after national supervisory agencies were disempowered and bank monitoring was transferred to the European Central Bank. This could also be a model for a common budget.

Ms. Merkel’s new openness to treaty revision can also be seen as an attempt to hand the whole debate over to committees of experts, and keep it out of the German electoral campaign.

When Mr. Macron visited Berlin on Monday, Chancellor Angela Merkel didn’t even rule out changing European treaties, something the German government had opposed up to now – because that would require referendums in several countries.

But it is also clear that years could pass before an EU treaty is revised. So Ms. Merkel’s new openness to treaty revision can also be seen as an attempt to hand the whole debate over to committees of experts, and keep it out of the German electoral campaign in September. So in July, after the French parliamentary elections, there will be a first German-French cabinet meeting; after the German elections, a joint task force will most likely be set up for dealing with a series of complicated issues.

The debate on reform will also partly be shaped by the people holding key posts. The term in office for Mario Draghi, president of the European Central Bank, will end during the next German legislative period. The government would like to see the post go to Jens Weidmann, currently president of Germany’s central bank, the Bundesbank, but the French have their own candidate in mind, and will expect something in return if they don’t get their way.

The fact that Mr. Macron and his advisors speak German doesn’t mean they automatically put German concerns over French interests, after all. “They just know better than their predecessors what is politically possible on both sides of the Rhine, and how to formulate it so there is no uproar in the other country,” said Daniela Schwarzer, head of the German Council on Foreign Relations.

The members of the new French government also know what numbers to call late in the evening when things get complicated – and indeed those calls have been made in the past. Mr. Macron’s chief strategist Ismaël Emilien knows the Green Party lawmaker Franziska Brantner, who was once his professor. The French general secretary Alexis Kohler went to college with Andreas Görgen, head of the culture section at the German foreign ministry. And Philippe Étienne has good networks in Berlin and also in Brussels. That will help, as Germany and France can develop ideas on their own but can only realize them together with the rest of Europe.

A few of Mr. Macron’s advisors have already warned of German delaying tactics but Mr. Macron hasn’t gotten bogged down in the issue yet. Ever since the French election campaign, when his rival Marine Le Pen said whatever the result, France would be governed by a woman – meaning either herself or Ms. Merkel – Mr. Macron has been working to make sure he is perceived in France as being on an equal footing with the German chancellor. After his trip to Berlin at the start of the week, he seemed to have avoided those pitfalls so far.

This article originally appeared in Die Zeit. To contact the authors: redaktion@zeit.de

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