Macron-Merkel partnership sets Europe on course for change

The future direction of Europe may rely on the blossoming friendship between France's new president, Emmanuel Macron, and German Chancellor Angela Merkel, writes Catherine Field.
Less than a year ago, euroskeptics predicted the European Union would fall apart under the pressure of nationalist demands and its internal contradictions.
Today, with populists driven into retreat by the problems of Brexit and by unease at Donald Trump, the EU has not just survived the doomsayers but is thriving - a desire for change is in the air.
But whether that mood will last or prove to be brief euphoria depends on the emerging relationship between France’s new president, Emmanuel Macron, and German Chancellor Angela Merkel.
The blossoming friendship between the 39-year-old French political neophyte and 63-year-old veteran German leader has revived giddy talk of the kind which europhobes deeply dislike.
With Britain now heading for the EU exit, the Franco-German “locomotive” which forged such enterprises as the single market, border-free zone and the euro is declared to be is back on the rails, with its engine warming up.
“Since the beginning of the European Union history back in the 1950s, it’s been Germany and France that have been the engine of European integration,” Luxembourg Finance Minister Pierre Gramegna said earlier this month. 
“What we are all expecting from this German-French cooperation is they will drive both the political agenda and the economic one.”
A flurry of Franco-German summits, climaxing with a joint meeting of their cabinets, has sketched a number of policies with far-reaching implications for the post-Brexit EU - and for countries like New Zealand that do major business with the bloc.
Continental Europe’s two biggest economies have stoutly defended the 2015 Paris climate agreement which Trump has abandoned and thrown their weight behind open trade, implicitly warning of reprisals if the US invokes protectionist measures against EU goods.  They have also set down a project for tighter European cooperation in defence, a long-standing French priority resisted by Britain.  France and Germany are to cooperate on a new warplane and military drones, helping to offset Trump’s criticism that European nations are getting a free ride in NATO.  Last month, the EU broke new ground by setting up a European defence fund with an annual budget of 5.5 billion euros (NZ$8.6 billion).
Corporate taxation in the German and French economies, the two biggest in continental Europe, will also be brought into closer alignment to avoid competition for company headquarters and investment.
Most important of all, there has also been the first cautious talk of a reform of the eurozone – the alliance of countries that use the EU’s single currency. 
In 2015, the euro was on the brink, after the near-collapse of heavily-indebted Greece triggered fears of a domino effect that would bring down other big eurozone spenders.  Bailouts and low interest rates by the European Central Bank helped to avert disaster, but the search is now on for a solution to exert greater control over national borrowing.
Macron has proposed creating a finance minister, parliament and budget for the eurozone – reforms requiring changes to EU treaties that would be challenging in France and Germany and, in other countries, politically explosive.  Merkel, facing elections in September, has for now responded positively but vaguely.
Can this visionary thinking, still in its embryonic stages, succeed?
Right now, goodwill towards Macron abounds in Germany after his election routed the scares of populism.  For years, Merkel craved the deep partnership with France that her mentor and predecessor Helmut Kohl enjoyed with Francois Mitterrand. Instead, she has had to team up with a string of weak French leaders, from Jacques Chirac to Nicolas Sarkozy and Francois Hollande, who frustrated Berlin by more talk than action.
But to achieve ambitious reforms, France and Germany will not just have to overcome resistance at home but also forge an alliance of EU “states of the willing” over conservative states in the eastern EU, such as Poland, Hungary and Slovakia, which will be hostile to the notion of a two-speed Europe.
In such light, Germany remains to be fully convinced that Macron has the substance to match his style for a gruelling campaign of this kind.  Indeed, there was a jolt to Macron’s cosy image when he invited Trump to the Bastille Day parade in Paris, where the pair engaged in macho handshakes and dined with their wives on the Eiffel Tower.  Macron used the invitation “to flatter the American president and make a name for himself as leader of Europe," the German weekly Der Spiegel commented sourly.
Analysts say that the key for Macron is to address French weaknesses that give ammunition to German critics when a big European project goes sour and leaves German taxpayers on the hook.
“Macron can have a major influence on EU policy provided he wins German support,” says Michael Leigh a former director for enlargement and neighbourhood policy at the European Commission, now senior adviser to the German Marshall Fund, a transatlantic think-tank.
“But for this, he needs first to bring the French economy into line with EU rules,” he said, referring to France’s flouting of the eurozone’s requirement to run a deficit of less than three percent of its GDP. “That’s no easy task.”
The scale of that job became apparent last week, when French armed forces chief, Pierre de Villiers, quit in a blazing row with Macron over plans to tighten military spending by 850 million euros (NZ$1.32 billion) – part of a planned belt-tightening in national and local government spending of 64.5-billion-euro (NZ$101 billion) over five years.
Macron is also forging ahead with a plan to ease labour laws by the end of September, making it easier for employers to hire and fire and overhauling France’s badly-indebted unemployment benefit system – a reform that Germany implemented more than 14 years ago and is a foundation of its booming economy today.
On the German side, the shape and pace of Franco-German plans for Europe will be determined by the legislative elections in September.  Opinion polls say that Merkel, a doughty political survivor in office since 2005, will be re-elected but without an overall majority.  If she turns to the Social Democratic Party (SPD) to forge another coalition with her conservative Christian Democrats, the winds will favour Macron’s ambitious eurozone plans. But if she teams up with the business-friendly Free Democrats, there will be a shift towards a more conservative approach that opposes changes to the EU treaties -- and the dream may recede.

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