Within a week of being sworn in as president of France, François Hollande will attend his first EU summit at a dinner in Brussels.The 23 May event, called by the European Council president, Herman Van Rompuy, has been organised specifically to size Hollande up, and to suggest that he is already making an impact.
Hollande will already have had his first meeting with Angela Merkel in Berlin, at which they will have tussled over austerity and growth policies in Europe and sought a compromise.
Both are centrist pragmatists, which suggests, but does not guarantee, a readiness to strike a deal. From Blair to Cameron to Obama to Mario Monti in Italy, it would be difficult to find a western leader who is not a centrist pragmatist. But bottom lines, national interests and acute policy differences remain.
As Europe wrestles with its great predicament, Hollande faces charges that he is a “dangerous” tax-and-spend Keynesian out to reverse the fiscal and monetarist rigour of the Germans and trick them into pooling eurozone debt by issuing eurobonds. Crisis sorted.
To judge by his aides, his programme and his statements, however, Hollande is nothing of the kind.
The French would like eurobonds, if they could get them. But with Berlin saying nein for the foreseeable future – though without ruling them out, eventually – Paris is not pushing.
Michel Sapin, Hollande’s key economics aide and possible finance minister, told German diplomats in Paris eurobonds were not the answer to the euro crisis, especially if a big enough firewall was in place in the form of the eurozone’s bailout fund.
“On eurobonds, Sapin was clearly sceptical,” said a memo to Berlin from the German embassy in Paris, obtained by the Guardian.
Sapin also ruled out big spending programmes: in attempting to reform the French economy, Hollande would opt for supply-side measures of the kind Berlin advocates every day.
“It’s absolutely essential to generate growth, but this can only be done through supply-side measures and no longer through state spending programmes,” the Hollande team told the German diplomats.
Hollande has outlined four policy areas in his push to restart Europe’s growth engine: increasing the role of the European Investment Bank, using the EU budget to try to combat recession, using both these vehicles to underwrite big infrastructure projects on a European scale – broadband, green technology, railways and the like – and allowing the eurozone’s permanent bailout fund to operate as a bank so that it can tap funds from the European Central Bank.
Of these four, only the latter is very contentious; it is stiffly opposed by the Germans. On the other three: the European commission has been making similar arguments for the past year, and a deal on European “project bonds”, using EIB or EU structural funds or both, looks likely at a summit at the end of June.
Such a deal would allow Hollande to claim that his growth agenda is delivering something, while enabling Merkel to emphasise that her “fiscal pact” compelling budgetary rigour across the eurozone is sacrosanct.
Hollande is not so much challenging the content of the fiscal pact as arguing it needs to be augmented by an explicit commitment to growth policies. Besides, almost all the new powers in the fiscal pact became EU law through separate legislation last December, and the French are not remotely suggesting that the laws be repealed.
The main exception here is the fiscal pact’s “golden rule” on balanced budgets and national debt ceilings, which Berlin says should be effected through amendments to national constitutions and policed by the European court of justice. Hollande opposes the court’s role.
The looming attempt to reach a consensus on broader eurozone fiscal union and economic policy-making, however, could yet be derailed by the crisis du jour – Greece.
While Berlin and Brussels insist Athens must abide by the punishing terms of its European bailout, it is unclear where Hollande stands if the issue goes hypercritical in the weeks and months ahead.
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