international analysis and commentary

Germany facing post-election Greece and Socialist-led France

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In Germany, the result of the Greek elections has caused relief in political and business circles. Nevertheless, experts subdued expectations as they anticipate harsh negotiations on Europe’s policy of cutbacks. The German Chancellor Angela Merkel welcomed the election outcome as a good signal for the euro and Europe. Yet, the Greek question is also important for Merkel at a national level as she needs the domestic backing for her European policy. But the support of the German population for financial aid to Greece continues to fade. In light of the upcoming national German elections in 2013, Chancellor Merkel has to increase the popularity of her policies and to hold on to her credo that Germany shall not be overburdened out of solidarity to other EU member states. Therefore, she hopes for the quick formation of a coalition government and Athen’s compliance with the terms of the €130 billion bailout.

Germany’s government has unceasingly been pushing for strict bailout terms and a policy of cutbacks for Greece. However, the German Foreign Minister Guido Westerwelle (Free Democratic Party, FDP) seems to be willing to make concessions when it comes to the envisaged time frame of Greece’s debt repayments. Chancellor Merkel does not agree with his position; but for both it is clear that no substantial changes of the terms will be made.

The social-democratic opposition issued a warning about the possible departure of Greece from the euro as this could set off a chain reaction for the eurozone. The chairman of the German Social Democratic Party (SPD), Frank-Walter Steinmeier, stated that Greece needs a government that is willing to undertake the necessary efforts to keep the euro. In the opposition, the Green Party (“Bündnis90/Die Grünen”) accuses the German government of demanding an excessively harsh cutback policy for Greece which will destroy its economy. According to the Greens, more time is needed and interest rate pressures need to be reduced in order to avoid the “Grexit”.

It remains to be seen if Antonis Samaras, leader of  the center-right Nea Demokratia party, will meet the huge challenges ahead better than his predecessor, George Papandreou, did. If Greece does not stick to the bailout terms it is questionable whether Chancellor Merkel will be able to maintain a pro-Greece position. On the other hand, could Germany cope with a eurozone traumatized by the “Grexit” given that its economy largely depends on exports to other EU member states? In any case, there are many reasons for serious concern: in particular, it is a fact that the probable two coalition partners, Nea Demokratia and PASOK, are the same ones that are politically responsible for Greece’s debt crisis, and this cannot be a good omen.

Contrary to the Greek elections, the socialist party of recently elected President François Hollande is the clear winner of the second round of French parliamentary elections with an absolute majority. It is an historic victory as Hollande is the first socialist president whose party holds the majority for both parliamentary chambers in France.

The presidential elections of May 2012 already marked a turning point in the political relations between the German and the French governments. The results of the parliamentary elections on June 17th confirmed the strong domestic position of President Hollande. However, the high abstention rate of 43.7% is slightly diminishing to his success. Former President Sarkozy and the German Chancellor were close partners in the austerity policies for Europe, to the point that Angela Merkel openly supported Sarkozy in his election campaign. The current Franco-German relations rather cooled off as Hollande disagrees with the austerity measures for Europe and demands €120 billion for a European “growth pact”. Merkel lost an important partner at the European arena and now stands somewhat isolated.

President Hollande now enjoys (at least temporarily) strong backing from the French population which makes it easier to oppose the German austerity measures. The domestic circumstances for Chancellor Merkel are instead rather unstable due to opposition in the Bundestag and several differences of opinion between her own party and the coalition partner, the Free Democratic Party (FDP). The latter faced a drastic loss of votes in the elections at regional state level. Consequently, Merkel may be forced to adopt a defensive stance on various key issues.

Moreover, Hollande keeps good relations with the socialist opposition party in Germany and invited the party leaders to the Palais de l’Elysée during their visit before the parliamentary elections; traditionally this is reserved for heads of states.

At the end of the day, for both countries the French-German partnership is still of great importance. And it remains true, as in the past, that if Chancellor Merkel and President Hollande are able to find a compromise for the pressing European challenges, they will lay the foundation for a wider European consensus even under the current harsh conditions.