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reflections

Aug 25, 2014 | 22:37 GMT

6 mins read

The Sentence That Felled a Government

(Stratfor)
It can be difficult to separate the important from unimportant on any given day. Reflections mean to do exactly that — by thinking about what happened today, we can consider what might happen tomorrow.

In the newspaper interview that cost him his job, French Minister of Economy Arnaud Montebourg said, “France is the eurozone's second-biggest economy, the world's fifth-greatest power, and it does not intend to align itself with the excessive obsessions of Germany's conservatives.” On Aug. 25, President Francois Hollande announced the dissolution of the government and asked Prime Minister Manuel Valls to form a new one without the controversial minister and other officials who share his views. The request is a sign of the stormy months ahead for the Franco-German alliance, in which Paris and Berlin will likely find it increasingly difficult to find common ground.

Montebourg’s words were not casual musings. They were emblematic of the growing resentment Germany's leadership of the European Union has caused, as well as the discomfort France's left wing feels regarding Paris's compliance with EU fiscal consolidation policies supported by Berlin. More important, Montebourg's words highlight the growing unease within some parts of the French establishment regarding what is perceived as a political and economic decline of the country and a total submission to Berlin's policy designs. 

When the European Communities were created in the 1950s by France and West Germany, Paris was the natural leader of the alliance. Germany was occupied and divided, and France saw continental integration as a way of ensuring peace while keeping some degree of control over its eastern neighbor. Even when the European Union and the euro were created in the 1990s, Germany was still absorbing the costs of reunification, and France still saw itself as the main political and economic power in Europe. The economic crisis changed things substantially, and now France is being forced to deal with its economic malaise while also confronting its declining role in the European Union.

Other large economies in Europe such as Italy and Spain try to influence European politics as much as possible, but they accept that they are rarely in charge of making crucial decisions. In terms of unemployment and economic contraction, the European crisis is not nearly as painful for France as it is for countries such as Greece or Spain, but from a political point of view, it is devastating. Unlike Rome or Madrid, Paris believes it can fundamentally alter Europe’s direction. However, it lacks the cohesive government with strong popular support needed to openly challenge Germany’s leadership in Europe.

This presents the French establishment with a dilemma: Should it seek to compromise with Germany and preserve the Franco-German alliance, or should it openly challenge Berlin and try to impose its view?

Since the beginning of the crisis, Paris has consistently chosen the first option. Former President Nicolas Sarkozy supported Germany’s demands for austerity, which led to the implementation of painful economic measures in the eurozone periphery. When Hollande took over, the Elysee decided to selectively challenge German Chancellor Angela Merkel (by, for example, missing the EU’s deficit targets), but not to the extent that it would create serious confrontation. Hollande's decision to get rid of Montebourg but keep Valls shows that he is still interested in seeking accommodation with Germany, even at the cost of deepening the divisions within his party. 

France's current position is particularly difficult for its Socialist party. Most center-left parties in Europe are deeply pro-European Union, and they see supranational integration as a key tool for bringing peace and prosperity to the continent. But today's Europe looks nothing like the Europe that socialist parties dreamed about when the treaty of Rome was signed in 1957. Rising unemployment, growing social unrest and thriving right-wing movements are putting Europe’s center-left in the difficult position of defending the EU while attacking its policies at the same time.

Right-wing parties, on the other hand, feel considerably more comfortable attacking the European Union. This explains the rising popularity of France’s National Front, which has successfully positioned itself as an anti-system and anti-European Union party. At a time when people have either lost their jobs or are afraid of losing them, the narrative that blames immigration, the European Union and its national elite supporters is very attractive.

No matter their political ideology, most French leaders are struggling to deal with the consequences of Europe's economic and political globalization, which has led to the free flow of people, goods and services. Some factions of the government defend France’s right to intervene in the economy and potentially block the sale of certain businesses to foreign investors. They also demand that the European Union tolerate higher inflation and subsidize certain sectors of the economy. Many members of the center-right criticize the Schengen Agreement, which eliminated border controls in Europe, and propose restoring a stronger role for national governments. Finally, the nationalists suggest that France leave the eurozone and reestablish trade barriers. This is quite revealing of the current situation in France: Most of the French leadership is uncomfortable with the status quo in the European Union despite their ideological differences.

Meanwhile, the Germans are having their own debates about Europe. In recent years, Berlin has decided to tolerate countries' failure to meet the EU’s fiscal targets in order to prevent further political fragmentation in Europe. Even the Bundesbank, which has traditionally had a very hawkish stance against inflation, has shown some willingness to accept expansionary policies by the European Central Bank. However, Germany has yet to have a crucial debate on if it is willing to compromise its national wealth for the sake of the European Union. Key issues such as the introduction of a fiscal union (where funds are moved from the continent’s core to its periphery), the application of quantitative easing by the European Central Bank (where the central bank buys bonds from eurozone members) and the creation of Eurobonds (debt issued jointly by the 18 members of the eurozone) are related to this core debate.

Berlin understands it needs to preserve its alliance with Paris to ensure the stability of the European Union, but Merkel’s government is also dealing with domestic constraints that shape its moves. Merkel bases her Europe policy on economic assistance for countries in trouble, which is meant to keep the eurozone alive, and on structural reforms and fiscal consolidation measures largely meant to appease German taxpayers. Germany understands that a weak France may create political problems in the long run, but it also offers Germany a chance to reshape the European Union according to its own strategic needs. Thus, Berlin fears a French-led European Union just as France fears the German-led one.

In the coming hours we will probably see a purge within the French cabinet meant to minimize internal dissent and create cohesion, but this will not be enough to solve the growing problems within the ruling party. More important, it will not appease voters in a country that is increasingly uncomfortable with its domestic situation and position within the European Union. At the heart of the European crisis are two countries that no longer share the same view regarding what the future of Europe should look like.

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