Jan. 21 (Bloomberg) -- German Chancellor Angela Merkel and French President Francois Hollande will seek to mask tension that’s dogged attempts to resolve the debt crisis and agree on economic change as they embrace in Berlin amid historic pomp.
Hollande arrives in the German capital today for a 48-hour extravaganza to celebrate the 50th anniversary of the Elysee Treaty, which sealed Franco-German friendship after World War II. While lauding the two countries’ relationship, Merkel flagged disagreement that has simmered between the two since Hollande succeeded her ally Nicolas Sarkozy in May.
“On certain questions we nevertheless have differences,” Merkel said in her weekly podcast. “That’s what makes German-French relations so stimulating, that we always need to discuss why we think differently on certain subjects.”
Merkel and Hollande have yet to forge a common line of attack as the French leader has worked to assemble a counterweight to Merkel’s pro-austerity policies in the debt crisis and allies of the German leader have urged Hollande to move more quickly on overhauling France’s labor market. The tension marks a challenge to the Franco-German alliance that’s formed the backbone of European unity for the last half century.
The two leaders will meet in the chancellery today before events tomorrow culminate in a joint session of parliament in the Reichstag, the seat of the lower house. They’ll give a press conference and speeches marking the historic embrace between West German Chancellor Konrad Adenauer and France’s Charles de Gaulle in 1963.
While Merkel formed a working relationship with Sarkozy, the one-term French president whose policies were close enough for the duo to be dubbed “Merkozy,” she has yet to do the same with the Socialist Hollande. Merkel said last May that her phone call to Hollande congratulating him for his election victory was the first time the two had spoken.
The atmosphere didn’t improve at the European Union summit at the end of June, when Hollande joined with Spanish and Italian leaders to mount a revolt against Germany’s austerity doctrine, wringing concessions from Merkel on the terms of bank rescues and direct recapitalization from bailout funds.
Hollande, who had campaigned against austerity in the election, threatened to block France’s approval of a deficit-reduction treaty that Merkel championed.
Anxiety over the French economy and Hollande’s struggle to bolster it has led to further tension. An ally of Merkel, Volker Kauder, the caucus leader for her Christian Democrats in the Bundestag, in November questioned whether Hollande’s Socialists were committed to “real structural reform.”
Merkel and Hollande should dispense with any exaggerated outward projection of comity, former European Commission President Jacques Delors told Der Spiegel yesterday.
“Enough of the hugs, sauerkraut and rounds of beer,” Delors told the magazine. “I’d rather that Merkel and Hollande speak their mind to each other in public. I would hope for words of reason from both of them -- they need to show a path on how to do it better.”
Hollande’s government has confronted a barely growing economy and a 10.3 percent unemployment rate that’s approaching a euro-era record, as companies such as PSA Peugeot Citroen and Alcatel-Lucent SA slash jobs. Last week the French president brokered an agreement between businesses and unions that allows companies to cut work time and pay as demand slows, while extending benefits and raising a tax on employers.
The French malaise contrasts with a German labor market that’s weathered the three-year debt crisis even as the government projects growth to slow to 0.4 percent this year.
“A fundamental problem of today’s Franco-German relationship is that the former symmetry between the two countries has changed thanks to the Germany’s increased economic power,” Ulrike Guerot, a Berlin-based analyst with the European Council on Foreign Relations, wrote in a note.
European finance ministers today will resume their crisis fighting at a meeting in Brussels. Their initial objective to cobble together a bailout program for Cyprus will likely be delayed as the Mediterranean island nation holds presidential elections next month.
Merkel will also be among euro leaders gathering at the World Economic Forum this week in Davos, Switzerland. European Central Bank President Mario Draghi will deliver an address at the event on Jan. 25.
Merkel underscored the importance of formulating a joint strategy with France, saying it will be one of her focuses this year ahead of German parliamentary elections in September.
“Of course we have to develop a growth strategy together,” Merkel said in the podcast. “That will be one of the biggest tasks for this year.”
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