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Hollande and Merkel Face Berlin Showdown

  • Henry Ridgwell

LONDON - They will try to overcome policy differences as the threat of a Greek exit from the euro looms closer

German Chancellor Angela Merkel and France's President-elect, Francois Hollande, meet for the first time in Berlin Tuesday against the backdrop of renewed financial panic in the eurozone. The two leaders will try to overcome policy differences as the threat of a Greek exit from the euro looms closer.

To the euphoric cheers of his supporters, Francois Hollande secured his victory on a platform of anti-austerity politics. Unlike his predecessor, Nicolas Sarkozy, there will be no post-election honeymoon on a Mediterranean yacht.

Just hours after being sworn in as president, Mr. Hollande will fly to Berlin to meet the very architect of Europe’s austerity program - German Chancellor Angela Merkel. She is playing down their differences. She says that Franco-German cooperation is essential in Europe. And, she says since we all want Europe to succeed, this cooperation will start very soon.

Francois Hollande wants Europe to invest more in growth. He campaigned for the introduction of eurobonds and a more political, powerful European central bank. This puts the two leaders on a collision course, says Philippe Moreau Defarges of the French Institute of International Relations.

“Mrs. Merkel looks very determined not to accept, you know, the Hollande vision. Mrs. Merkel says, 'We must reestablish more healthy public finances. We must tackle the debt issue.’ And Mrs. Merkel will not move," he said.

French voters rejected the austerity program of their outgoing president, Nicolas Sarkozy.

Although his successor may be riding the crest of an anti-austerity wave, he does have an Achilles heel, says Olaf Cramme, director of the Europe analyst group, Policy Network. “Hollande has a very strong democratic mandate but a very weak economic mandate. France has a lot of problems as far as current account balance of payments is concerned, the deficit, unemployment etcetera, so he will also be constrained to what he can do," he said.

Angela Merkel faces problems, too, after a bruising election defeat in Germany’s most populous state on Sunday, just 18 months before national elections.

But it is the brewing storm in Greece that is stoking fears in Berlin and far beyond.
Greek parties are struggling to form a government and may reject the budget cuts insisted on by the European Union.

The prospect of Greece leaving the currency bloc is now openly under discussion in European capitals, unthinkable just a few months ago, says analyst Olaf Cramme. “What do we do with the Greeks? Do we change the terms of the bailout program? Do we give them more time? Do we inject more funds? That’s really controversial, and it’s where the Germans want Angela Merkel to be really tough," he said.

France and Germany have been the driving force behind European integration. Analysts say their respective leaders will have to overcome their differences rapidly with the very survival of the euro at stake.