German chancellor will be steeling herself for a polite confrontation that will set the agenda for European politics
Francois Hollande, the Socialist party candidate for the French presidential election, will be making Berlin his first stop if he wins. Photograph: Pierre Murati/Reuters
In a little over six weeks in the gleaming glass-and-concrete chancellery in Berlin, Angela Merkel will be steeling herself for a polite confrontation that will set the agenda for European politics for the foreseeable future.
Sworn in the previous day as France's first leftist head of state in a generation, President Francois Hollande will be making Berlin his first stop in order to tell Merkel that her central response to the two-year euro crisis, the fiscal pact signed by 25 heads of government this month, has to be re-opened.
This is the scenario being drawn by the Hollande camp if he wins the French presidency on May 6. Last week's Toulouse killings may have dented Hollande's chances, with Sarkozy staging a law-and-order comeback. But polls consistently give Hollande a 10-point lead over Sarkozy in the second round run-off.
If that pattern holds, Hollande will become only the second socialist to run France since WWII, after his former boss, Francois Mitterrand. And his aides make clear that his first move will be to challenge Merkel's domination of the campaign to save the euro.
"I will renegotiate [the fiscal pact], improve it, then ratify it," Hollande told The Guardian at a recent meeting of centre-left leaders in Paris.
Hollande owes Merkel little. She has gratuitously snubbed him in the French election campaign while conspiring, says the Hollande camp, to ensure that the centre-right leaders of Europe – in Spain, Italy, Poland, and Britain – also steer clear of him. In Brussels and Berlin, the expectation among policymakers and senior diplomats is that Hollande will beat Sarkozy, though more narrowly than the opinion polls now indicate.
"You can feel a bit of a pause in the [EU] machinery," said a senior diplomat in Brussels. "People are now factoring in the chances of a significant change of government and its impact on the euro. How will policies change? The Germans are really worried and they're trying to get things done now just in case." There is no doubt that a socialist victory in France would redraw Europe's political map, representing a huge boon for the centre-left following recent gains in Denmark, Belgium, Slovakia, and Croatia.
"Europe has no future if it does not change direction," says Pierre Moscovici, Hollande's campaign manager and a possible prime minister.
"We are living through an important moment for Europe and the left. We hope Francois Hollande's election can make a lot of things possible."
But the recent conference of centre-left leaders in Paris was long on calls for more democracy in the EU, on attacks on centre-right austerity and slashed budgets, while short on specific policy recipes.
"We've lost the economic argument," said David Miliband, Labour's former foreign secretary. "Hollande has to win the social democratic argument before he can win the democratic argument."
Miliband's forthright if gloomy diagnosis — that the EU is struggling to retain legitimacy among voters because of the paucity of policy and the failures of its leaders to deliver — was met by stony silence.In confronting Merkel's emphasis on thrift as the answer to Europe's deep malaise, Hollande declares that a Europe where one in four young people is jobless is a recipe for even bigger trouble than in the past two years. He calls Merkel's treaty the austerity pact and says it will not work.
Hollande wants the pact be rewritten to focus on jobs and growth. To that end he wants the EU budget and European Investment Bank funds to be leveraged in the bond markets to raise billions for public works and infrastructure projects. He also wants the European Central Bank to act as the eurozone's lender of last resort. He also questions Merkel's insistence that the European court of justice be empowered to overrule national parliaments on balanced budget laws and how and whether EU governments can be fined for perceived profligacy.
Much of this is anathema in Berlin. At a recent lunch in London, Mario Monti, the Italian prime minister, told Ed Miliband, the Labour leader: "What you have to understand is that for Germany economics is a branch of moral philosophy."
But Merkel can be confident since many of the measures in the fiscal pact being challenged by Hollande are already EU law. Hollande is not talking about repealing the legislation. But if the German leader may feel she has won even before Hollande joins battle, she could yet come unstuck in her own parliament since she needs the backing of the opposition social democrats (SPD) to ratify her pact by a two-thirds majority.
"Merkel will have to adapt," Sigmar Gabriel, the German SPD leader told the Guardian. "She thinks Europe is obese and needs to be put on a crash diet. In fact large parts of Europe are suffering from heart disease and need treatment."
If Hollande wins, Gabriel looks likely to make his support for Merkel's pact in the German Bundestag conditional on striking a compromise deal with the new French president.
While a Hollande victory would provide a boost to the European left after years in the doldrums, its real impact may be less partisan, in recalibrating the balance of power in Europe after two years of crisis during which Germany's top position has become unassailable.
Berlin is worried that its stewardship of the euro crisis has revived old stereotypes about the domineering, bullying "ugly German". A German foreign ministry strategy paper on Europe last month, obtained by the Guardian, said: "The European project is currently experiencing the worst crisis of confidence in its history … Old resentments and prejudices have returned. Fears of an overmighty Germany have been awakened among some of our neighbours."
The senior diplomat says: "Germany is very sensitive to some of the unfortunate effects on its public image."
A new French leader contesting Berlin's prescriptions on the euro crisis will encourage many others to come out of the closet. Under new leadership since the turn of the year, Italy and Spain are already bristling with indignation at what they see as the fiscal straitjacket pushed by Berlin.
A Mediterranean alliance of France, Italy, and Spain – under socialist, liberal, and conservative leaders and representing the eurozone's three biggest economies after Germany – would spell trouble for Merkel.
"We might have different [political] sensibilities, but we face similar problems," says Pierre Moscovici of Rome and Madrid. "Germany is not alone. We will have a strong voice."
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