France’s president-elect Hollande needs to build trust with Germany
France's president-elect Francois Hollande, who plans to make Germany his first foreign trip, may not find himself a bon ami in Berlin unless he could manage to reconcile his pro-growth ideas with German Chancellor Angela Merkel's emphasis on fiscal discipline in tackling the ongoing European debt crisis.
Hollande, who beat incumbent President Nicolas Sarkozy on Sunday with some 52 percent of the vote, has vowed to renegotiate the newly-inked fiscal pact to make it more growth-friendly and introduce euro bonds, which are frowned upon by the German leadership.
Merkel managed to push through tighter budgetary discipline and her vision of eurozone austerity thanks to the support of outgoing Sarkozy. The smooth running of Franco-German motor in the fight out of the eurozone debt crisis is now uncertain with Hollande's victory.
The austerity-focused fiscal treaty Hollande threatens to renegotiate with more pro-growth initiatives cherished by Merkel as the cornerstone of her European policies to tackle the root of the debt crisis that sprang up in Greece in late 2009. A total of 25 EU countries, except Britain and the Czech Republic, signed the intergovernmental treaty on fiscal stability in March.
The compact is expected to enter into force on Jan. 1, 2013. Hollande is also in favor of broader mandate for the European Central Bank, and the creation of European "project bonds" to finance investment and infrastructure.
Merkel has responded with more talk of growth, arguing that pro-growth measures is nothing new in her policies and the way out of this crisis has always rested on two pillars -- solid finances and measures for growth and employment.
"It is important that we break with the idea that growth always costs a lot of money and must be the result of expensive stimulus programs," she told the Hamburger Abendblatt.
Although she said she backs structural reforms to spur economic growth, Merkel made it clear that the pact won't be reopened.