55th anniversary of the Élysée Treaty: A new Franco-German axis?

French President Emmanuel Macron (R) and German Chancellor Angela Merkel (L) during their meeting at Elysee palace in Paris, France, 19 January 2018. [EPA-EFE/CHRISTOPHE PETIT TESSON / POOL MAXPPP OUT]

This Monday (22 January) marks the 55th anniversary of the Élysée Treaty signed between Germany and France. German government negotiators are now considering a reprisal of the landmark treaty. EURACTIV Germany reports.

Franco-German relations have been characterised by bloody conflicts. From the policy of France’s 17th century monarchs and the Napoleonic wars to the Franco-Prussian war of 1870-71 and the two world wars.

The Élysée Treaty of 1963 was an historic break. While the many economic agreements of early European integration, such as the Coal and Steel Community and the Customs Union, brought together markets, that treaty brought people together.

The “Erbfeindschaft” [hereditary enmity] was not terminated by free trade but by youth exchange programmes, town twinning and similar projects.

Until the 1990s, co-operation between the two countries continued to expand at all levels. Together, the governments of Germany and France took over the leadership role in the European integration process and are largely responsible for the constitution of today’s EU.

With German reunification and the creation of the European Monetary Union, however, the Franco-German balance of power began to waver. Enlarged by the rejoined (eastern) states, Germany experienced a tremendous economic and political boost.

The same applies to the introduction of the euro, which enabled Germany to develop its traditional mercantilism, build up ever larger export surpluses, and press more and more aggressively into foreign markets.

This affected France’s domestic-focused economy, which came under increasing pressure from German competition and which has lost almost a quarter of its industrial value added since the introduction of the euro.

Merkel, Macron to deepen Franco-German cooperation, strengthen EU

Chancellor Angela Merkel and President Emmanuel Macron said on Sunday (21 January) they wanted to deepen Franco-German cooperation and give the European Union a fresh push towards closer integration.

The euro crisis policy of recent years also showed that a reconciliation of interests of the two largest eurozone members hardly took place.

While France relied on cooperation and common approaches to crisis resolution, such as European investment and joint liability for public debt, Germany wanted to impose the burden of adjustment on countries through austerity and structural adjustment programmes as well as strict and sanctioned fiscal rules.

Germany has asserted its line, as proved by measures such as the Troika programmes and the European Fiscal Compact.

Relations between the German and French people is stable enough to endure this development. Nevertheless, it did not remain unburdened.

The French increasingly perceived Germany as the taskmaster of Europe, while more and more Germans feared they would have to help cover the debts of the Western neighbour.

But the pendulum of power recently swung again in favour of France: with Brexit, Germany loses its most potent ally in the EU. At the same time, efforts are being made in the Mediterranean, as well as in the Nordic region, to speak more strongly with one voice at EU level – which in turn plays into the hands of France.

The emergence of right-wing forces also showed that endless curtailment and liberalisation is not possible without risking the collapse of the entire integration project – which would be a disaster for the German economy.

This is how a new equilibrium was created. Germany and France have to realign themselves in order to move forward. And it needs a reconciliation of interests between the two largest euro members.

This holds the potential for a new Franco-German axis with the aspiration to take the lead in the further integration process. This situation also fuels hopes in southern Europe, since their interests lie closer to France’s than Germany’s.

Accordingly, French President Emmanuel Macron is self-confident in presenting his ideas: a euro area budget managed by a euro finance minister, coordination of labour market policy, establishment of military cooperation and financial and labour market liberalisation are the core elements.

A few years ago, Paris would not have dared to suggest this agenda, given that it was totally hopeless back then.

Germany's SPD warily backs formal coalition talks with Merkel

Germany’s centre-left Social Democrats voted Sunday (21 January) to begin formal coalition talks with Chancellor Angela Merkel’s conservatives, bringing Europe’s top economy a step closer to a new government after months of deadlock.

Today, things are different, as the most recent paper issued by the German Grand Coalition negotiators revealed.

The high status of the Europa chapter alone speaks volumes. And when it speaks of a “eurozone investment budget”, “better coordination of labour market policies” or “budgetary means for economic stabilisation and social convergence”, Macron’s stamp can be read all over it

Essentially, nothing less than a new Élysée contract is being asked for. A nice thought – but the new Franco-German axis will not do justice to it. A common agenda consisting of the emerging policy lines would at best bring the economic and financial elite of the two countries closer together. Ordinary citizens would gain little.

In this scenario, France would receive certain elements of a transfer union, be it a euro budget, Eurobonds or whatever.

In return, Germany would have rules according to which these transfers are always linked to political measures that are in the interest of the German economy: spending cuts as well as liberalisation and privatisation programmes.

Wages would be more coordinated, with adjustment pressure on high-wage countries, as Macron’s labour market reform in France shows. The financial markets would continue to deregulate, destabilising the real economy and threatening jobs.

Investment would not be primarily in public services such as health or education but in military rearmament. Democratic processes and political participation would be weakened because central competences would be transferred to technocrats in Brussels.

German parties offer first response to Macron on Europe

Chancellor Angela Merkel’s conservatives and the centre-left Social Democrats pledged today (12 January) to work closely with France to strengthen the euro zone, in their first substantive response to President Emmanuel Macron’s ambitious EU reform proposals.

Such a policy may save the EU and the monetary union from ruin in the medium term because it stabilises the economic disparities that had been growing ever since. However, today’s deficit countries would continue to suffer from constant adjustment pressure.

The Franco-German axis, mediated by the institutions, would deeply influence the fate of weaker countries. There, the resentment over the influence from Berlin, Paris and Brussels would continue to grow.

Maybe that would weld Germans and French together more strongly, because the wrath of others would no longer be directed at Germany alone.

But this kind of international understanding would not necessarily be in the spirit of the Élysée Treaty.

The ordinary citizens in Germany and France would pay the price in this scenario: wage moderation, labour market liberalisation and tax cuts for wealthy and corporate clients. The fact that it is all about large corporations and banks that are the basis of the axis policy would remain perceptible – and this would not boost the passion for Europe.

A new Élysée treaty, which would be more reminiscent of a troika dictate than community-based exchange projects, may more effectively manage the crisis of European integration in the interests of Franco-German elites. But it cannot solve it.

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