The stage was set Monday for a test of wills between Hollande, the Socialist who defeated conservative Nicolas Sarkozy in elections Sunday, and Merkel, another conservative who, together with Sarkozy, imposed the treaty in December on often reluctant E.U. partners to force a decline in deficits and debts.
Both leaders were setting out markers for negotiations likely to begin as soon as Hollande officially takes office May 15, or sooner. The goal will be to reach a Franco-German agreement before an informal E.U. summit conference in Brussels around June 1 to discuss what some officials have characterized as a “growth pact” to complement the austerity pact.
Although the German and French starting positions seemed far apart, analysts suggested there was a lot of room for compromise despite Merkel’s open support for Sarkozy during the campaign. Moreover, they added, Merkel and Hollande both know that Franco-German friendship is vital to both countries and has been a pillar of national politics on both sides of the Rhine since Charles de Gaulle reconciled with Konrad Adenauer half a century ago.
“It is in the interest of Merkel and Hollande to have a functioning and even a constructive relationship very quickly,” Nicolas Veron of the Bruegel research institute in Brussels noted in a recent panel discussion.
Even before Sunday’s runoff election, senior Hollande aides were in Germany reassuring Merkel’s government, according to reports in the German news media. A note summarizing their discussions predicted that the new French president would seek “a pragmatic solution” to the standoff and “wants to align himself in continuity with Franco-German efforts for Europe,” the reports said.
‘A dimension of growth’
The European Union’s 27 member nations already declared at their last summit, held March 2, that the debt crisis was on its way to resolution and that they would increasingly be looking for ways to stimulate their economies. The main difference between Merkel and Hollande is over how that should be done.
Throughout his year-long campaign to unseat Sarkozy, Hollande pledged to reopen the December treaty to add “a dimension of growth” to its requirements — which have triggered painful budget cuts — that E.U. governments bring down deficits under threat of fines. This could be done, he and his aides suggested, by adding capital to the European Investment Bank to promote more business loans, or by issuing E.U. bonds backed by the European Central Bank.
“Europe could at last decide to raise funds,” Hollande said in an interview with the Slate Web site published Monday. “This is the challenge of ‘eurobonds’ or ‘project bonds.’ ”