Franco-German Relations

Everything and Nothing in Common

main 83131631 Reuters – Angela Merkel Chancellor Germany Emmanual Macron French President May 15 2017 Berlin chancellery
Let's shake on it, Emmanuel. Source: Reuters

The French parliamentary elections appear to herald a new era of Franco-German cooperation and increased European unity. That could translate into serious changes for how the EU does business, with both nations in support of a closer monetary union, harmonized taxes and a finance minister for the EU. The French and Germans also agree on increased defense spending and closer cooperation on refugees entering the bloc.

But when it comes to partnership, the devil is in the details. This becomes clear when scrutinizing statements made by senior politicians on both sides – especially regarding the roles and responsibilities of new EU institutions and positions. Here is a run down of how the two nations line up.

Euro-zone Budget: 19 Countries, One Allowance

Since 2013, France has called for a trans-European budget for all 19-member states of the euro zone. While Emmanuel Macron is on board, Germany remains skeptical. Angela Merkel says she is willing to go along with a euro-zone budget, but only under certain conditions around expenditure and control.

Social Welfare: Not Doling It Out

French socialists have long suggested that the majority of unemployment benefits for citizens of EU countries – around 50 percent of their previous salary – should be paid from a common European budget. However, Mr. Macron isn’t so enthusiastic about the idea, knowing that the extreme differences between welfare systems makes this a difficult proposition. The Germans are even less keen, saying it could discourage required labor market reforms.

Euro Bonds: No Thanks

After his election, Mr. Macron made it clear he was not a supporter of euro bonds, which would spread sovereign debt across all euro-zone nations. That comes as good news to Ms. Merkel, who is also opposed to the idea, claiming the bonds would violate German law and sovereignty.

EU-Wide Taxes: No More Havens

Work has already begun to harmonize corporate taxation in Europe, a topic that has been talked about for years as a way to kick start growth. German finance minister Wolfgang Schäuble and his French counterpart, Bruno Le Maire, have established a working group to look at how to harmonize corporate taxes in France and Germany. Mr. Schäuble sees this as an example that might eventually be useful Europe-wide.

EU Finance: One Minister to Rule Them All

Mr. Macron believes a finance minister for the euro zone is necessary. While the Germans have no major objections, Mr. Schäuble wants clarification on what sort of rights and responsibilities such a role would entail. A euro-zone finance minister who can reject draft budgets when the deficit is too high? Ja, say the Germans. The same minister distributing surplus money? That’s a big nein!

Brexit: Tough Talks

Mr. Macron’s administration is sticking to the line taken by former president François Hollande: access to the common market is only possible if the right to free movement of EU citizens is retained. The French also prize their military cooperation with the Brits. The Germans seem to be taking a slightly tougher line. Non-membership in the EU needs to look extremely unattractive in order to prevent further defections. Maintaining the integrity of the union and the common market is of the utmost importance.

Defense: More Please

Mr. Macron wants to raise defense spending to 2 percent of the national budget, and he’s a supporter of increased cooperation in military matters and research. He also believes in an EU mission control and defense headquarters. The Germans are with him on this although they differ somewhat on details of cooperation, specifically when it comes to participating missions. With all things military since the end of World War II, the Germans err on the side of caution.

Refugees: Soft Words, Hard Lines

Even though Mr. Macron praised Ms. Merkel’s handling of the refugee crisis in 2015, the French continue to take a fairly hard line on immigration. Mr. Macron wants to give Frontex more money and work more closely with African nations, honoring aid commitments if they take their citizens back. The Germans are more intent on working with third states, like Turkey, but in general they don’t take issue with the French position. Both countries agree that the EU needs to show solidarity and to support those member countries on the front line of the refugee crisis.

Trade: No More Naivety

This is one area where the two countries have vastly different approaches. The Germans have often blocked protectionist plans from the French because, as an exporter nation, they benefit greatly from open markets. France, on the other hand, is extremely concerned about the Chinese dumping goods in Europe and handicapping whole sectors. Mr. Macron has called for a tougher position toward trading partners and a more realistic attitude toward globalization. Both nations do share a concern about the Chinese buying up more European companies.

 

Thomas Sigmund is Berlin bureau chief and heads Handelsblatt’s political coverage. Thomas Hanke is the newspaper’s correspondent in Paris. To contact the authors: sigmund@handelsblatt.com, hanke@handelsblatt.com

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!