“Never waste a good crisis” is an English expression that you can safely leave to the French and Italians. In the political “no man’s land of Christmas”, and moreover shortly after Angela Merkel stepped down as Chancellor and on the eve of the French Presidency of the European Council, President Emmanuel Macron and Prime Minister Mario Draghi chose their moment.
They fired a targeted flare into the dark December night over the European Union.
They want to relax European budget rules to allow more investment in “research, infrastructure, digitalisation and defence”, they write in the Financial Times. In other words: the rules of the European Stability and Growth Pact (SGP) need a thorough revision. That pact was imposed 25 years ago under pressure from Germany. It led to exactly what southern European member states did not want with the currency union: German blind obedience to rules.
Latin sisters
When the French and the Italians come up with a plan together, you know: the need is high and the audacity great. They are like two Latin sisters who regularly disagree with each other, but know when it is time to forge an occasional alliance. When they do, they bring out the best in each other.
France is the incarnation of Cardinal de Richelieu (1585-1642). He was the king’s “prime minister” and broke domestic resistance to establish a centralised state. The strategic ingenuity of the French was perfected by the tactical cunning of the Italians, personified by Nicollò Machiavelli (1469-1527). This diplomat advised the prince to see “boldness” precisely as a virtue: exploit the weaknesses and vices of your rivals to achieve your own goals.
An example of such a successful Franco-Italian alliance of convenience resulted in the Maastricht Treaty on 7 February 1992. In it, Germany undertook to give up the Deutschmark for the sake of a single European currency. The spiritual fathers of this alliance were President François Mitterrand and Prime Minister Giulio Andreotti. The latter stated at the time that “these preparations were the result of our personal contacts and the work of our officials. They were not improvised”. French advisor Jacques Attali confirmed this: “The treaty had no other purpose than to get rid of the D-mark.”
Chance of success
Now the French and Italians have set a new dot on the horizon: drastic relaxation, and preferably abolition of the SGP. Their chances of success are considerable, for both psychological and political-economic reasons.
For example, the muddy layers of German history - that upon which its identity is founded - are primarily psychological in nature. With the Thirty Years’ War (1618-1648), Germany was the focus of European religious and civil wars. What followed was a culture of hostility that led to three wars with France that ended in a psychological burn for Germany: the Holocaust.
According to psychoanalyst Margarete Mitscherlich, the German people lost their self-esteem. She called the Wirtschaftswunder (economic miracle) after 1945 a “manic defence of depression”. With the resulting Deutschmark, which became the anchor of Europe, the Germans, she said, “shook off the guilt of Auschwitz”.
The fact that Germany was nevertheless prepared to sacrifice its monetary power - and with it its regained identity - on the altar of Europe underlines how damaged the country was coming out of the period 1618-1945. Germany’s greatest fear is isolation in the fragile centre of Europe. That is why it remains prepared to make great sacrifices. Berlin has even implicitly accepted that France is the engine of European unification, or as Chancellor Helmut Kohl used to say: “When you go to Europe, you should first salute the French Tricolore.”.
France is acutely aware of this German vulnerability and never shies away from always asking questions on the European stage. Where the Germans argue for federalism, the French work for a supranational architecture, with its own European budget. This is not illogical (anymore). The world is in the grip of migration, geopolitical tensions and power shifts and threats such as climate change.
Such global challenges require quick decision-making and lots of money. It is therefore likely that the criteria of the SGP - a budget deficit of no more than 3% and a debt ceiling of 60% of GDP - will be washed away in the wash of world problems.
Pro-European
For Germans, that is a hard bargain, even though in Berlin a coalition of social democrats, greens and liberals is now in charge and committed to major investments, such as digitalisation and the environment. Moreover, this is a generation of politicians with a strong European orientation, unburdened by Germany’s historical fear of inflation.
Unbroken in Berlin, however, is one iron post-war principle: Germany has only one destiny, that of the EU. Or, as the former German finance minister, the Bavarian Theo Waigel, once put it to me: “To feel like a Bayer, to be a Deutscher, to become a European. Das ist unser Schicksal.” The future will show whether new German concessions for the euro are a curse or a blessing.
Cees van Lotringen, editor-in-chief of Fondsnieuws & Investment Officer, previously worked as a correspondent for the Dutch financial daily in Germany and France. This article also appeared on the opinion page of the FD today.