By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.
Following the German-French council of ministers in Paris on Monday, Chancellor Angela Merkel and President Nicolas Sarkozy gave a joint press conference about the crisis in Greece, among other topics. They agreed on everything. They urged the Greek government and all political parties to implement structural reforms and meet the Troika’s demands for deeper budget cuts. Without them, the next bailout tranche would be blocked.
Then they headed to the Elysée Palace, the official residence of the French president, where they gave a joint TV interview amidst gilded splendor. Merkel berated socialist François Hollande, Sarkozy’s top challenger in the upcoming presidential election. Among her peeves: his campaign promise to renegotiate the new fiscal-union pact that 25 EU member states had already signed, and that she was pushing towards ratification. Then Sarkozy lashed out against Hollande. If a treaty signed by a head of state could simply be renegotiated by his successor, then “there would not be any treaties in the world at all,” he concluded.
Ten weeks before the election! And apparently, her next intervention in the campaign is scheduled for early March; she will stand near him on stage as he announces his official candidacy. Never before had a German chancellor campaigned so hard on French soil for a French president.
However, the most recent polls (BVA and Ipsos) gave Sarkozy little chance: he would survive the first round, but during the second round, Hollande would trounce him with 58% of the vote against 42%—and Merkel’s most cherished oeuvre would be at risk.
Merkel and her government have struggled fiercely to create a fiscally united Europe of balanced budgets and “structural reforms”—a euphemism for lowering the cost of labor, including wages and benefits. It’s her prescription for pulling the Eurozone out of the debt crisis. At the moment, her eyes are on the nightmare in Greece where even politicians are preparing for the “afterwards.” Read…. Greek Politicians Are Taking Cover.
Sarkozy has been her most powerful ally during the debt crisis. Without him, she couldn’t have pushed through her policies, which have been a resounding success, in Germany: in a recent poll, 64% of Germans have a favorable opinion of her, and 90% were satisfied with her crisis management.
But Hollande has declared war against her policies. He wants to push the ECB to aggressively buy sovereign bonds, and he wants Eurobonds so that risks can be spread, both of which Merkel has categorically rejected. He wrote: “The Eurozone must arm itself with a veritable financial force de frappe”—the term for France’s nuclear strike force. It would be used to combat the financial markets. He doesn’t want Merkel’s austerity, but stimulus. And he wants to renegotiate Merkel’s fiscal-union pact.
If he wins the election, he will find enough support among other EU states to push through at least some of his policies. But Germany is unlikely to fall in line. A handful of other countries might side with Germany and form a bloc. It might tear the Eurozone apart. To prevent that, Merkel has set out to beat him on French soil before it’s too late.
A desperate gamble. Rather than building bridges to the front runners so that a post-election continuum would be easier to achieve, she is actively fighting for the victory of Sarkozy, who has time after time abandoned his own proposals in favor of hers.
“A quid pro quo,” Harlem Désir, the number two at the Socialist Party, called it. He accused Sarkozy of having made “graves diplomatic concessions” on the role of the ECB, on Eurobonds, on austerity, and on the financial transaction tax in return for electoral support from Merkel.
With her intervention in the French election, Merkel has created the impression that preventing Hollande from becoming president has morphed into a government policy, and it doesn’t necessarily enhance Germany’s image abroad. Already, its reluctance to pay ever more to bail out the Eurozone has made it a global punching bag. Yet the amounts it has committed through a myriad of bailout programs are staggering. Read…. Germany Frets As Bailout Risks Balloon.