European Integration

Strengthening the Franco-German Axis

FRENCH BUSINESS FORUM DINER
In talks about how to draw France and Germany closer, finance minister Wolfgang Schäuble with Mr. Sapin, his counterpart from France. Sébastien d’Halloy for Handelsblatt
  • Why it matters

    Why it matters

    • If France and Germany cannot work together to drive European integration, the European Union will grow weaker.
    •  
  • Facts

    Facts

    • France and Germany are making plans for closer cooperation on defense.
    • The United Kingdom insists all defense cooperation should be done through NATO.
    • The European Union does not want to start informal Brexit talks with Britain until it formally applies to leave the block.
    •  
  • Audio

    Audio

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Germany’s finance minister Wolfgang Schäuble and his French counterpart Michel Sapin made it clear they want to reshape the European Union in the wake of Brexit, and are determined not to let the United Kingdom undermine the euro zone.

At the third French-German Business Forum held by French business daily Les Echos and Handelsblatt in Paris, both politicians spoke in favor of concrete, pragmatic steps to strengthen the euro zone and the European Union.

They made it clear that both German and French governments are determined not to be duped by possible British “salami tactics,” trying to negotiate deals and agreements with individual industries and countries.

Officials believe it is conceivable that the British government will try to court various industries, like the automobile industry or the agri-food sector, with promises of unfettered U.K. market access. This would likely be followed up with attempts to secure optimum conditions for its own financial sector, while agreeing to an absolute minimum of free movement for workers. And for that very reason, French and German negotiators will not agree to advance talks, either nationally or involving individual sections of industry.

“Now the Franco-German partnership doesn’t have too much going for it, the euro has its problems and a majority of the United Kingdom’s citizens voted to leave the European Union.”

Gerhard Cromme, Siemens supervisory board chairman

Mr. Sapin and Mr. Schäuble recommended a policy of small steps being introduced in the euro zone: To expand the European Stability Mechanism or ESM to a kind of currency fund; for payments from the structural fund to adhere to stability criteria; to complete the European Banking Union, which was initiated in 2012, and to cautiously begin restructuring the banks with contributions from both creditors and owners.

But this kind of tweaking will not be enough. France’s Trade Minister, Matthias Fekl warned that “a complete standstill of E.U. trade policy” was imminent and said the E.U. should ditch its tortured attempts to sign the trans-Atlantic free trade treaty TTIP in its current form.

Gerhard Cromme, chairman of Siemens supervisory board, who understands the Franco-German dimension to trade like no one else, said Brexit had left Europe in real danger of stagnation.

“The European idea was based for many decades on three pillars: the Franco-German partnership, which was a basis for European integration; the resolution of the U.K. to be part of Europe; and the decision to have a currency in Europe,” he said. “Now the Franco-German partnership doesn’t have too much going for it, the euro has its problems and a majority of the United Kingdom’s citizens voted to leave the European Union.”

France and Germany are also currently debating just how closely to cooperate with each other in defense.

Georg Adamowitsch, now head of the German Association of Security and Defense said there needed to be closer cooperation, in the model of the European Space Agency. He was backed up by Dirk Hoke, head of Airbus Defense and Space, who said this kind of close cooperation would make sense economically.

Caroline Laurent, head of strategy at the procurement office of the French defense ministry, said France would only cooperate in defense if it was allowed to absolutely keep its sovereignty in terms of procurement.

 

Thomas Hanke is Handelsblatt’s correspondent in Paris. Hans-Jürgen Jakobs is a senior editor at Handelsblatt and a former editor-in-chief of the paper. To contact the authors: hanke@handelsblatt.com and jakobs@handelsblatt.com

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