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Heavy drumming

14 June 2012 By Pierre Briançon

Financial desperation combined with diplomatic inexperience could end up costing the euro zone dearly. France, Italy and Spain seem to think that presenting Germany with the same demands, over and over again, will soften Angela Merkel to the point that she will accept reforms like euro bonds, a banking union or a direct recapitalisation of the region’s banks by the European Stability Mechanism, the euro zone’s bailout fund. But the more the gang of three insists, the more Germany is digging in its heels. On some of the issues it can even rely on the support of the European Central Bank. Ganging up on Germany is not only inefficient: it could backfire if it makes it impossible for euro leaders to come up with some common vision at their summit at the end of the month.

The euro zone used to be simple. It only took Germany and France to agree on the main issues. Then the two of them went to work on the others to clinch the ultimate deals and compromises. The situation has changed. Since the bailouts began, the split between the north and the south has widened. France has a foot in both camps. It is the second-largest contributor to the bailouts, but also has a fragile economy which might have to rely on German benevolence at some point in time.

François Hollande started his presidency in a conciliatory mode with Merkel, after having campaigned against German-style austerity. Now he seems to want to lead the clan asking for serious German concessions. He invited Merkel’s opposition, the Social Democrats (SPD), for talks at the Elysée. He is clearly aiming at some kind of alliance with Italy’s Mario Monti, whom he is visiting on Thursday in Rome, and is on the same page as Spain’s Mariano Rajoy.

The aim is to get Germany to agree to what it has always refused: immediately launch reforms that would imply financial backing from Berlin. Merkel understandably wants to make sure that some European fiscal authority keeps national governments in check. Her partners’ insistent drumming will only reinforce her in the conviction that she alone stands in the way of irresponsibility.


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