How Germany's 'Grand Coalition' could rescue the wobbly Paris-Berlin tandem

Franco-German relations today combine great dynamics with a good deal of anxiety. On the German side, the anxiety is about France – its capacity to reform its economy and modernise its political system. The risks are seen to range from France losing its triple A rating in the bond markets to an overwhelming win by Marine Le Pen in April’s regional elections and her Front National party triumphing in the European elections in May, leading potentially to an implosion of the French political system. On top of that, social unrest like the ‘Bonnet Rouge’ movement in Brittany is building up thanks to waves of layoffs, with France haunted by the spectre of de-industrialisation: La Redoute, Alcatel-Lucent, Peugeot, Michelin…the list of big companies that have cut their payrolls is lengthening. Only 13% of France’s GDP now comes from the industrial sector, yet 10 years ago it contributed 18%. Some 12,000 small and medium sized companies were bankrupted in 2013, 7,5% more than the year before and France’s loss of 400,000 jobs since 2007 are due to be increased by a further 50,000 in the coming months.

These are just some of the gloomy figures that define France’s economic and social state of emergency. And from the standpoint of the EU’s former Franco-German tandem the asymmetry couldn’t be greater. On the other bank of the Rhine, Germany’s new government is inheriting an economy that runs like clockwork, with exports rising to new heights and unemployment down to levels never seen before. Most parts of Germany are sparkling, and in Berlin the new federal government has more money than ever for fiscal policies affecting incomes or retirement benefits – the new ‘Mindestlohn’ minimum salary is being hailed as a major achievement of the new coalition pact.

This growing asymmetry between Germany and France has a high political price. In Berlin, talk of the political situation in France ranges from real concern about Germany’s most important European partner to contempt at what is seen as a French ‘incapacity’ to reform. France’s failure to emulate the famous ‘German model’ is an all too frequent part of political conversations.

Germany’s anxiety is beginning to drive the new dynamics of the relationship. The lesson learnt during the recent years of euro-crisis management is that Germany cannot go it alone. France remains its indispensable partner, even if it won’t be the only or even a sufficient one. Germany is too dependent on France’s banks, its economy and the room it affords for political manoeuvring. Berlin cannot ignore the risk of political gridlock in France over the EU and its European policy; Europe is so unpopular in France these days that books like François Heisbourg’s ‘La fin du rêve européen’ are a telling illustration of the way dissident voices of former pro-Europeans are influencing the debate. The formerly pro-European French elite is today seen to be leaving the EU’s sinking ship and forging unholy alliances with those French intellectuals who have long been against the euro as a single currency. A shade less than a third of people recently polled in France are still in favour of European integration.

The result is that opinion leaders on both sides of the Rhine are trying to find quick fixes in the shape of new policy solutions and initiatives that could restore the political fortunes of the Franco-German tandem. The new German coalition government seems set to make a substantial contribution. Chancellor Angela Merkel’s agreement with the Social Democrats on a minimum wage, retirement, public spending, infrastructure programmes and so on corresponds to many of the things that France’s socialist government hoped for. Andrea Nahles, Germany’s new minister for work and social affairs will certainly be trying to smooth out the most radical effects of the country’s controversial Harz-IV reforms a decade ago. The French Socialists and the SPD in Germany have been working closely together in a variety of working groups and have issued common papers on many European policy issues. The leaders of both parties co-signed Op-Ed articles long before France’s presidential elections of 2012 brought François Hollande to power.

So is the Franco-German couple back? Francois Hollande’s mid-January press conference seemed to point in this direction: its speech then appeared to send a triple signal: A clear commitment to the economic reforms long urged by Germany; an offer to talk about the energy and defence questions that have strongly divided the couple; and an invitation to share thinking on the deeper integration of the eurozone. There is now talk of a far-reaching Franco-German initiative to engage civil society in both countries so as to signal a new commitment towards EU political union. What this boils down to is whether France and Germany will provide what everybody else in the EU is waiting for – a clear vision of where the EU, and especially the eurozone, is heading for.

A template for what could be done already exists. In May of last year, François Hollande unexpectedly came out with a proposal on political union. For the first time, France seemed receptive to German concerns over the need for legitimacy of the eurozone, including a reshaping of the EU’s parliamentary system. Only a few weeks after that France and Germany presented a surprise common paper on ways to further integrate the eurozone.

There are, to be sure, different readings of this Franco-German paper. One is that there isn’t very much in it, other than nice rhetoric. Yet others think there may be more than that to this paper. Its most interesting aspect is probably that the EU Commission hardly features in it, whereas it proposes that the Eurogroup that’s made up of eurozone finance ministers could be strengthened through the appointment of a permanent president. The European Stability Mechanism (ESM) – potentially to be transformed into a European Monetary Fund (EMF) – looks close to being a new sort of executive Commission in all the policy areas that require closer integration within the eurozone, ranging from fiscal to social policy, and from budgetary issues to economic co-operation. The European Commission itself would seem not to be in the driving seat here, with the eurozone based in future more on contractual agreements that would determine the new institutional set-up. The Eurogroup’s permanent president might eventually become the ‘European finance minister’ urged by former ECB chief Jean-Claude Trichet and German finance minister Wolfgang Schäuble in their Karlspreisspeeches when each accepted the annual Charlemagne Prize.

Whatever this new Franco-German Europe turns out to be, Paris and Berlin will need to make sure that it is open to all who want to join. Meanwhile, it remains far from easy to assess the current state of Franco-German relations. They two have shown an impressive degree of resilience over the years, always able to push forward if the political pressure is great enough. But this time it feels different. On both sides, mistrust is on the rise, while political will is an unknown quantity. Behind all this there is still arm-wrestling over whether it is Paris or Berlin that has the more pull internationally. This is true not only of euro-governance but also of security and defence or energy policies – a gap that Hollande is now apparently offering to close.

The divide between France and Germany has, for the time being at any rate, undoubtedly widened, despite all the rhetoric of last year’s 50th anniversary of the Elysée treaty between the two countries. When Germany’s president Joachim Gauck paid a state visit to France last September, the Franco-German TV channel Arte published an interesting survey on the relationship in which 85% of respondents cited Germany as the more important of the two. Although 80% of Germans still see the relationship as one of peers, only 55% of French do, and while 62% of Germans think the relationship is better than before, only 25% of French agree. Rather than the Paris-Berlin relationship being in tandem, it is looking more like a German motorbike with a French sidecar.

Despite the growing asymmetry, the nature of the Franco-German relationship is that Germany has to accommodate French policy concerns in a different way to those of all the other EU countries. Germany cannot unduly pressure France, while France has to grapple with the difficulty of convincing Germany that its economic power needs to be matched by greater international responsibility. In an ideal world, the Franco-German tandem would combine German economic muscle with France’s strategic outreach, and would feed the two into EU structures so as to create a political and strategic sounding board for all Europe.