Merkel: ‘The fiscal pact is not up for discussion’

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Even after the victory of socialist François Hollande, German Chancellor Merkel and politicians of her conservative CDU fiercely refuse renegotiating the fiscal pact. But there could be a way to compromise, as Hollande receives support from Italian premier Mario Monti.

German Chancellor Angela Merkel's congratulations to the new French president could have been warmer: She will co-operate well and intensively with Hollande, she assured during a press conference in the Berlin headquarters of the Christian Democrats. After all, the Franco-German co-operation is "essential  for Europe", goes the traditional argument.

Merkel's foreign minister Guido Westerwelle sounded more enthusiastic. He is not well-known for his foreign language skills but he prepared two sentences in broken French to congratulate Hollande: "Félicitations pour le nouveau Président," he said. “L'Europe, c'est notre destin commun,” he added.

The same optimism was also apparent in the German media. Some commentators already spoke of a new "Merkollande" couple replacing the previous "Merkozy".

The fact that Hollande is even-tempered compared to the more volatile Sarkozy might help, the German daily Frankfurter Rundschau predicted. Ruprecht Polenz, foreign policy expert at Merkel's CDU party, agrees. In the Tagesspiegel, he writes tha Hollande might be a better partner than Sarkozy was at the beginning of his mandate because of “his particular personality structure“.

The Süddeutsche Zeitung is optimistic that the new “Merkland” couple will be better able to cover a broader political spectrum encompassing both the conservative-liberal and the social-democratic spectrum in Europe.

Despite Hollande's fierce rejection of the fiscal pact during his campaign, Franco-German talks have already begun at a lower level to find a compromise, as the Süddeutsche Zeitung reports. In case of a victory, Hollande is ready to work out a “pragmatic solution,” the newspaper said, quoting diplomats. So-called “elements of growth” should be added to the fiscal discipline treaty, which 25 EU heads of state and government signed in March.

However, this could turn out to be more difficult than Merkel and Hollande would like the European public to believe.

Yesterday (7 May), Merkel left no doubt that “the fiscal pact is not up for discussion“. Elmar Brok, a CDU member of the European Parliament went even further: “Mitterrand had one-and-a-half years to correct his socialist course, Hollande has only days to his inauguration.“

In June, Hollande should be “on track,“ he added. His colleague Markus Ferber from the Bavarian CSU underlined that “the German taxpayer will not come up for the expensive campaign pledges of the new French president Hollande,“ he told EURACTIV Germany.

The French Socialists on the other hand are not giving up on the growth pact. Jean-Marc Ayrault, who is widely tipped to become France's next prime minister, made it clear in a statement on national broadcaster France 2. “The message, that French people have understood very well, is that we have to overcome austerity politics,“ he said.

However, there could still be a way to compromise. As Germany's foreign minister Westerwelle already suggested, the Germans could be ready to give some ground on the growth pact. In Berlin, Merkel pointed out that negotiations have already started to launch a growth initiative at European level.

But what is the substance behind Hollande's so-called growth pact?

In the campaign, Hollande has supported a more active role for the European Investment Bank (EIB), a position Merkel could probably agree on. A few days ago, she said she could imagine “that we amplify the options of the European Investment Bank“. The same goes for the financial transactions tax, that both Berlin and Paris have tried pushing at European level.

More problematic is Hollande's support for "Eurobonds" to finance large infrastructure projects in energy, broadband or transport. The German government so far has fiercely rejected this suggestion.

However, Hollande seems to be gaining support from Italy. Merkel was not the only one to call the newly elected French president shortly after his victory on Sunday. Italian prime minister Mario Monti not only congratulated him, but also assured Hollande that Italy was ready to co-operate with France “in the aim of a more efficient European Union directed towards economic growth“.

After all, launching so-called "project bonds" originally was Monti's idea. He could now have found a strong ally and play a significant role in balancing possible tension in the Merkel-Hollande couple.

The election of a socialist in the eurozone's second largest economy is seen by many as a potential game-changer for the European Union.

With François Hollande, France is expected to push harder for growth-enhancing measures alongside fiscal discipline as a way to tackle the eurozone's ongoing debt crisis.

For Germany, which has been the main driver behind the austerity consensus in Europe, Hollande will certainly prove a more difficult partner than his predecessor Nicolas Sarkozy.

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