The two nations’ disputes always seem to be about money. It was Germany that last year suggested pooling funds within the euro zone through a special joint euro-zone budget, but now the country has given up on the idea again. Merkel had used the initiative in an effort to prevent a renewed discussion about euro bonds at the time. The chancellor initially proposed a figure in the low billions that would go to support, for example, universities in highly indebted euro-zone countries. She saw this as a sign of solidarity.
But the idea didn’t go far enough for France and the Southern European members of the monetary union, who would prefer a euro-zone budget of over €100 billion that would also fund economic stimulus programs. This counterproposal only served to reinforce Germany’s preconceptions about the French. The proposed project won’t play a role at the summit this June.
A proposed banking union, which France has pushed for, is likewise failing to move forward. Berlin insists such a union would require amendments to EU treaties, a step Paris opposes. German Finance Minister Schäuble has based Germany’s position on the new functions the euro-zone states want to transfer to the European Central Bank (ECB). If the ECB takes over responsibility for regulating banks, Schäuble argues, shifting that authority from a national to a European level should be backed up legally by a treaty. Otherwise, national courts – especially the German Constitutional Court – could overturn the new rules. France and other countries want to avoid amending the treaties, a burdensome process they say would take too much time.
Nor is the debate concerning euro bonds over. France favors these joint government bonds, for which all euro-zone members would share liability, but Germany strongly opposes the idea….
Hollande hopes Germany’s upcoming elections will bring about a new government that will be more open to his suggestions. Paris knows an electoral victory for a coalition of Germany’s Social Democratic Party (SPD) and Green Party is unlikely as things stand now, but it believes a grand coalition of the center-left SPD and center-right CDU would be beneficial for France.
There, France may be mistaken. Yes, the SPD might well take a friendlier approach toward Paris. Frank-Walter Steinmeier, the party’s parliamentary group leader, has said it isn’t good “to keep speaking in catchphrases, saying what deadbeats the French are.” The Social Democrats are also unlikely to push for austerity as fiercely as the current government has.
At its heart, though, the SPD’s position on these issues differs little from Merkel’s. When the crisis hit Cyprus, it was primarily Germany’s Social Democrats who warned against using German funds to help Russian oligarchs. Similarly, euro bonds as Hollande envisions them will find few supporters among SPD leaders. The SPD also considers reforms in France inevitable, just as Merkel does. “France is in the same situation we faced in 2001,” Steinmeier believes.
Hollande will have a chance to find out personally what issues separate German Social Democrats from French Socialists when he speaks at the SPD’s 150th anniversary celebration in Leipzig on May 23. Hollande also may find he doesn’t enjoy the company at the podium so much – he’s scheduled to appear side by side with Merkel.