Eurozone crisis

A new Trafalgar for Merkel and Sarkozy?

Published on 10 March 2011 at 16:26

“Are we about to face another Trafalgar? The battle that will oppose ‘the euro continent’ and the Anglo-Saxon markets is set to begin on 11 March,” warns Eric Le Boucher. TheLes Echoscolumnist explains that the outcome of this battle “will be determined by the Franco-German couple: Nicolas Sarkozy and his opposite number Angela Merkel.” Both leaders are intent on convincing the countries of the eurozone to adopt their Competitiveness Pact at the European Council summit on 25 March.

With the pact, “the Chancellor has prepared a particularly long list of demands,” notes Süddeutsche Zeitung. And “many commentators believe that most of them will likely be met — especially since she benefits from the unconditional support of Nicolas Sarkozy. All the indications are that the French President, who is hoping to be re-elected for a second term next year, is aiming to convince voters that a German style economic model is the perfect antidote to Southern European penury.”

“On the one hand, we have the French who have accepted the German principle of budgetary austerity. On the other, Germany has accepted a concept of ‘economic governance’’ that takes into account other aspects of economic competitiveness — a development that amounts to a major change of heart on the other side of the Rhine,” explains Eric Le Boucher.

“Unfortunately, Poland, Austria, and the Netherlands are none too pleased by what they perceive to be an attempt to undermine their national sovereignty and to impose a diktat drafted in Berlin and Paris. Herman Van Rompuy has watered down the proposals on governance, transforming the rules for states into recommendations. But the deal is still in doubt, while German economists remain unhappy with what they believe is a blank cheque for states that overspend.”

“Mrs Merkel and Mr Sarkozy are aware of their responsibility,” adds the business daily columnist. “They have to avoid a repeat of Trafalgar. Respect for the sovereignty of small states, which is one of the principles of the European project, must be guaranteed, but at the same time, governments will have to acknowledge that more battles on financial markets are a greater threat to their sovereignty than a diktat.”

But “before making any concessions, Merkel will want to see what she can obtain in return,” warns Süddeutsche Zeitung. “Without the Competitiveness Pact, there will be no approval for a sustainable bailout mechanism. And the Chancellor will not green-light any reform of existing funds until the banks have passed a stress test. Without adequate knowledge of the situation in Greece and Ireland, Berlin will not give in to demands for a lower rate of interest on loans. The basic message is: ‘she who pays the piper calls the tune’.”

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