Tensions Grow Between Germany and France over Austerity

The ambassadors who gathered in the library of the German Foreign Ministry the Thursday before last knew the situation was unusually serious. These diplomats are accustomed to seeing images of Chancellor Angela Merkel with a Hitler mustache drawn on her face, hearing vitriolic tirades about Germany's enforcement of austerity policies in Europe and experiencing tense diplomatic talks. For some time now, German diplomats have watched anti-German sentiment increase dramatically in many countries in the European Union.

Under these circumstances, the ambassadors who converged at the Foreign Ministry certainly didn't expect the meeting to be any kind of laid-back reunion, but what they encountered still caught them by surprise. Nikolaus Meyer-Landrut, Merkel's EU policy advisor, gave the diplomats an unvarnished picture of the Chancellery's concerns that matters may not improve any time soon. Merkel's advisor left the diplomats with a clear impression that the German government has given up hope of any appreciable progress in European policy before Germany's federal elections this September.

Officials in the Chancellery consider the culprit here to be neighboring France, the country that is meant to function together with Germany as the motor driving the EU as a whole. Paris, Meyer-Landrut said, isn't interested in reaching agreements with Germany on fundamental questions before September. The meaning behind his words was clear -- French President François Hollande is counting on the German elections putting a new government in place in Berlin, one he hopes will be more willing to compromise. Hollande no longer expects anything from the current German government.

Relations Worse than Pessimists Predicted

A year into Hollande's term, Franco-German relations are even worse than pessimists in both countries predicted. Berlin and Paris are at odds on almost every issue when it comes to tackling the current crisis, disagreeing on everything from a banking union to a bailout for Cyprus to eurobonds. It's common knowledge that nothing happens in the EU without these two neighbors agreeing on a course of action, yet they continue to block one another.

The issues at stake are not trivial ones. At the core of the Franco-German conflict is no less a matter than the question of how Europe can shake off the current crisis. Merkel is convinced this can only be achieved by implementing reforms -- austerity, liberalization of the labor market and restructuring of social welfare systems.

But Hollande is unwilling to let Germany impose its model on France. He fears the European recession will only worsen if Berlin succeeds in implementing its austerity plans. Since Hollande announced in March that France must reduce government spending, the faction within his party pushing for confrontation with Germany has gained traction.

Hollande believes his viewpoint is gaining traction around Europe to the point that Germany will eventually be under such pressure, it will no longer have any alternative to making concessions. He sees proof in an about-turn on the part of European Commission President José Manuel Barroso, who stated last week that although he believes the austerity polices are fundamentally correct, he also thinks they have reached their limits.

The political differences between Berlin and Paris are further exacerbated by personal antipathies. Chancellor Merkel and President Hollande have never warmed to one another. That in itself isn't necessarily a problem, since politicians can work together well without becoming instant friends. Helmut Kohl and François Mitterrand found common ground only with great effort, and Merkel's relationship with Hollande's conservative predecessor Nicolas Sarkozy got off to a rocky start as well. But at this point the mutual trust that once existed between France and Germany has been lost, and the chemistry between Merkel and Hollande is so poor that the two risk causing serious harm to the EU as a whole.

Willful Obstinacy

Some of this comes across as willful obstinacy. Hollande, for example, still hasn't forgiven the German chancellor for her failure to receive him in Berlin during his electoral campaign. He also makes no bones about how little connects him and Merkel.

Relations seemed to reach a nadir late last week after a draft policy paper introduced within Hollande's leftist Socialist Party got leaked to the French daily Le Monde. The paper threatened a "showdown" with the "chancellor of austerity" and derided Merkel's "selfish intransigence," saying her policy positions exclusively serve "the savings of depositors in Germany, the trade balance recorded in Berlin and her electoral future." The paper, drafted for a party conference on Europe in June, created a furor in France and Germany over the weekend. Bowing to pressure from the government in Paris, the Socialists apparently removed the most strongly worded and "stigmatizing" language ahead of the conference.

Even though the paper may reflect the president's privately held opinions, it was not clear whether he was aware of the exact wording in advance. The French satirical newspaper Le Canard Enchainé reported on Monday that one of Hollande's personal advisors had given the green light in advance, but when the attacks on Merkel caused a stir, Prime Minister Jean-Marc Ayrault sent out conciliatory tweets in German. On Wednesday, asked during a press conference with Italian Prime Minister Enrico Letta if he had been aware of the text, he responded by saying he was not the party leader and that the "text didn't need to incriminate a European leader to make a point."

Merkel, meanwhile, makes little effort to extend personal courtesies to her French counterpart. Two weeks ago, she invited euroskeptic British Prime Minister David Cameron and his family for an intimate tête-à-tête at her guest residence in Meseberg, northwest of Berlin. If Hollande had been hoping to receive a similar gesture of friendship, then his wait so far has been in vain.

Leaders Give Up on Franco-German Project

It seems both leaders have given up on the Franco-German project for the time being. The chancellor is frustrated that she is no longer able to influence French policy. Her suggestions found a willing listener in Sarkozy, but with Hollande they fall on deaf ears. Merkel is also annoyed with the constant calls for greater solidarity. From a German perspective, this amounts primarily to demands for more money -- from Berlin's coffers.

German Finance Minister Wolfgang Schäuble of Merkel's center-right Christian Democratic Union (CDU) is similarly dissatisfied with the discord between Berlin and Paris. At a meeting between CDU parliamentary representatives and their counterparts from the conservative French party Union for a Popular Movement (UMP), held at the Konrad Adenauer Foundation a few days ago, Schäuble acknowledged he has considerable differences of opinion with his French counterpart Pierre Moscovici.

Germany blames Paris for Europe's standstill, seeing France's lack of willingness to undertake reforms as the issue at the core of the euro crisis. Officials at the Chancellery believe France must implement fundamental reforms along the lines of those Germany undertook with former Chancellor Gerhard Schröder's Agenda 2010 program -- which made painful cuts to longterm unemployment benefits and reduced unit labor costs among other things to make the country more competitive -- and that there is not much time left to do so.

Germany and France initially wanted to use this period of relative calm in the euro crisis to advance important reforms, and to take an important step toward a common economic and monetary policy at the EU summit this June. Now it's unlikely they will manage even a tiny step.

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• Part 1: A Deep Frost in Franco-German Relations
• Part 2: Bickering over Money