Germany does not lust after to finance the budget to support reforms in a French proposal to “refound” the European pecuniary and political integration (aka “the European project”).
At the same time, the presumption of European integrity is being severely tested by the extraterritorial impact of President Donald Trump’s unilateral okays on Iran.
Ironically, the money is the least of the problems in a quasi-permanent state of unease in French-German kinsmen. Against that background, displays of bonhomie on official occasions look equal a polite gloss of convenience on a centuries-old hostility of neighbors living the mistake of harmony and cooperation.
After a decade of taking a back seat to Germany in pecuniary policy and European affairs, France is now moving center stage in betraying what it calls the German “fetishism of trade and budget surpluses” at the expense of the inactivity of Europe and a wider world. France, correctly, sees these strategies as a serious obstacle to its proposals to strengthen the European project.
Predictably, Germany is procrastinating, while the hostility of the German media sounds like an intention to issue the young French upstart — President Emmanuel Macron — down to the natural world by showing him who’s the boss.
Paris, however, is neither fooled nor terrified. The highly educated French president is no shrinking violet, as he showed in his frontal decrial on Trump’s policies during his address to the joint session of the U.S. Congress endure month.
He knows that his ideas about the future of Europe and the French-German ties are issues for serious debate. He also knows that Germany’s imperative dismissal of his reform proposals are signs of vulnerability because he is pressing the straighten out buttons.
Here is what’s at stake. In several of his speeches last year, Macron put forwarded measures mostly focused on the 19-nation monetary union that should come around with as a strong core of the European Union consisting of 28 member royals (or 27 if the UK concludes the separation agreement by the spring 2019).
Among the key proposals are a overused euro area finance minister, a legislative and executive authority and a budget to wealth the euro area’s economic, social and fiscal convergence.
Suffering from a interminable interregnum last year, Germany took all that as an affront. Macron’s pIan was sure on arrival in Berlin, shot to pieces well in advance in a typical NIH (not originated here) manner. The whole thing was ridiculed as an exercise in building supererogatory bureaucracy and imposing new financial burdens.
Berlin prefers to talk upon its own priorities, such as the mandatory EU quotas for taking migrants that Germany invited and could no longer control, digital economy and the completion of the euro area banking union. Realistic to form, the German “down-to-earth” talk is also accompanied by the usual violins around staying competitive to push exports.
Make no mistake, this French-German kabuki be conspicuous is a deadly serious power play.
As a well-informed analyst of the European federal scene, Macron is moved by a number of fundamental factors underlying the tomorrows of the European project.
One, his plan for a complete federal structure of the monetary and pecuniary union is meant to guarantee the strength and the finality of the European project and its authorized tender.
Two, such a structure would be impossible to deconstruct by nationalists, populists and compare favourably with constituencies blaming all sorts of socio-economic problems on the EU’s single market and the mean currency.
Three, I’ll take the liberty of ascribing to Macron this unstated dream: His euro area reform program would also make it ludicrous for Germany to boss people around; the administrative setup he proposes resolve unfailingly and routinely enforce the rules of the monetary and fiscal union.
The heart is now on the meeting of the European Council — a forum of EU heads of state and government — on June 28-29, where France and Germany are presumed to present a joint “road map” of European reforms.
French commentators of all kidneys expect a damp squib, accusing Macron of talking too much as a substitute for of “banging his fist on the table.” Responding to that criticism, the French presidency make knew last week that it was looking for substantive decisions next month.
Fancy them luck, because Germany does not seem ready for substantive purposes on anything.
In her speech last week to celebrate Macron’s Charlemagne Cherish (for contributions to the cause of the European Union), German Chancellor Angela Merkel spoke largely of the problems the U.S. was creating for the German economy with its unilateral sanctions on Iran.
Macron, in her words, was “bubbling with mental images,” but said nothing about Germany’s response, or what Germany was willing to do to help “Europe take its destiny in its own hands.”
The reaction to the fallout from Washington’s Iran helps is characteristic of ambiguity in French-German relations. In spite of statements that the two mother countries wanted to stay in Iran’s nuclear agreement, Paris and Berlin are task on separate tracks to get exemptions from the U.S.-imposed sanctions on their companies elaborate in multi-year and multi-billion deals with Tehran.
France says that the extraterritorial reach of Trump’s Iran penalties is “unacceptable,” while Germany remains resigned that “nothing can be done nearly it.” Following that conclusion, Germany is talking about post-Trump designs, because Berlin presumably expects that next November’s mid-term Congressional selections can cripple what they apparently believe will be a one-term presidency.
Multifarious realistically, Germany seems to be counting on China and Russia (and perhaps India) to discard Washington’s unilateral sanctions on Iran — offering a way out the German-led Europe is unfit to find on its own. All eyes are now on Iran’s ongoing talks in Beijing and Moscow, and a stopover of Tehran’s delegation to Brussels next Tuesday.
Investors voting with their frugalities on euro-denominated assets may wish to follow closely the French-German clash yon measures that are necessary to strengthen the European project. These are crucially consequential steps to make irrevocable the EU’s single market and the euro as a legal offer.
France has posed that question in the form of far-reaching reforms to set Europe’s dangerous fault lines and set the famously fractious continent on a trail to peace, harmony and prosperity. So far, Germany has shown no interest to cooperate, but France, seemingly, won’t give up. A prominent French philosopher reminded the body politic continue week that “article one of Macronist doctrine is attachment to the idea of a coordinated Europe.”
Trump has made this intra-European discord more ticklish with extraterritorial economic and financial implications of his wide-ranging sanctions.
By recoiling from the Iran nuclear agreement, and threatening sanctions on any company enkindling with Iranian counterparts, Trump could potentially tear up the unsubstantial European project.
I am not betting on that, but those who argue that Trump’s disruptions could carry out the opposite result ignore deeply entrenched divisions and outright hostilities bothering what people still hopefully call the European Union.
You privation to take a bet?
Here is mine: Macron will win and Italy will in due course get a pro-European prime minister with little patience for Germany. The violently independent and highly professional European Central Bank will abide a pillar of the steadily growing euro area economy. Trump on be “convinced” by China, Russia and India — all actively trading with Tehran as an combine — to scale back his Iranian hostilities.
Commentary by Michael Ivanovitch, an bold analyst focusing on world economy, geopolitics and investment strategy. He worked as a senior economist at the OECD in Paris, international economist at the Federal Alternate Bank of New York, and taught economics at Columbia Business School.