Why Merkozy is destined to fail

Whoever believed that the never-ending eurozone crisis had been solved during the holiday break would have been surprised by the difficult French bond auction last week, Italian yields once again shooting above the crucial 7 per cent mark, and renewed speculation about a Greek default.

In short, there would have been enough reasons to refocus on the core problems of the European crisis after Christmas.

But none of these events would have featured on Angela Merkel’s radar. The German chancellor has other problems than the hard facts of the financial crisis. Her problems are called Nicolas and Christian. One is the president of France, the other is the president of her own country. And neither may be in office for much longer.

At a time when Europe is once again looking at Germany and, to a lesser degree, France as the two countries that ultimately will decide the fate of the common currency and the future of the European Union, political distractions threaten to paralyse the process.

While French presidential elections in April and May require Nicolas Sarkozy’s full attention, Germany’s Federal President Christian Wulff has caused a political crisis, not least for Chancellor Merkel, with revelations about personal misconduct.

Merkozy, the celebrated rescue duo for the continent, are drawn to fight domestic battles at a crucial point in the eurozone crisis. "Mer” dreads losing her second president in as many years, "Kozy” fears losing the presidency himself. Despite their relentless European summit diplomacy, their attention is thus absorbed by power struggles on their home fronts.

Nicolas Sarkozy must hope for a political miracle if he wants to remain president. Opinion polls have been solidly against him for a long time. There is even a slim chance he could be eliminated in the first round of the elections if right-winger Marine Le Pen manages to put him in third place. She is currently trailing the incumbent by a margin of 7 per cent. In the final run-off election, however, socialist candidate Franois Hollande is predicted to beat Sarkozy with a comfortable majority.

Sarkozy, who has always been known as impulsive and at times unpredictable, has to fight for his political life or he will be a one-term president. Under such pressure, how likely is it that he will not give in to sudden populist temptations? How much political capital does he still wield considering that France is also at risk of losing its triple-A rating anytime in the coming months?

Until Election Day it could well be that we will not see so much a lame duck French president but a headless chicken. Election campaigns are seldom times in which calm and reasonable arguments prevail. They are almost never times when solid policymaking takes place, even though that is what Europe desperately needs right now. But don’t expect it to originate from Paris.

Angela Merkel will be watching the movements of her most important European partner with concern, particularly since any agreement on issues such as fiscal union may not last beyond May. Where a new president Hollande may take France in European affairs is hard to predict but as a French left-winger, he does not share Merkel’s enthusiasm for stricter fiscal rules and harsher austerity regimes.

Internationally, Merkel is seen as a strong and sometimes feared figure, yet her position at home is becoming increasingly difficult: not just because of her weak Liberal coalition partner, who is down to a record low of 2 per cent in the polls – a level that would not even see it in a future parliament. Merkel’s biggest worry at the moment is Federal President Christian Wulff, whom she had nominated to the largely ceremonial office of Germany’s head of state two years ago.

In December, newspapers revealed embarrassing and potentially illegal details of Wulff’s personal and financial affairs. When he was still state premier of Lower Saxony he had accepted a cheap loan from an entrepreneur friend, or rather his wife as he now claims, to finance his home. When previously asked in state parliament whether he had any financial dealings with this businessman he had nevertheless denied it.

Journalists digging deeper into the president’s financial circumstances soon discovered more evidence of accepting undue advantages from his contacts. Free holidays, paid advertising campaigns for his book, and a super-cheap mortgage arrangement from a state-owned bank all added to an impression of a politician who mastered the art of using office to his personal gain.

The scandal would have probably died down if it had not also been revealed that the president had left angry messages on the answering machines of a journalist and a publisher, threatening them with ‘war’ and criminal prosecution if they went ahead with their stories.

From this moment onwards the affair had the potential of turning into a constitutional crisis. The legal hurdles to remove Wulff from his office may be high, but a head of state engaged in anti-democratic conduct against the free press may well be politically untenable.

The president’s crisis has become Angela Merkel’s very own problem as it was her idea to install Wulff in his office in the first place. To make the situation worse for her, there is no guarantee that she will find a majority for another candidate in the Federal Assembly.

Losing ‘her’ president and failure to produce a replacement would be hugely embarrassing to Merkel. She knows that many commentators would interpret it as the beginning of the end of her chancellorship. She might even conclude that it is better to leave a fatally damaged president in office if only to spare her political humiliation – unless Wulff’s fall from grace eventually shows up in Merkel’s own approval ratings.

None of this is good news for what lies ahead in the eurozone crisis. At a time when leadership would be required, the two most important continental European leaders are absorbed by political struggles they probably cannot win. The likelihood of the Merkozy tandem delivering anything substantial over the coming months is slim; the probability of this political marriage lasting beyond May is even more remote.

The eurozone crisis may soon return with more bad news from bond markets. Pity Europe’s leaders are too busy to deal with it.

Dr Oliver Marc Hartwich is a Research Fellow at the Centre for Independent Studies.

More from Business Spectator

Comments

Please login or register to post comments

Comments Policy »
I would like to comment on some comments in this piece (Why Merkozy is destined to fail, January 12).
Oliver says, "At a time when Europe is once again looking at Germany and, to a lesser degree, France as the two countries that ultimately will decide the fate of the common currency and the future of the European Union". That is a very scary fact, these two leaders have clearly demonstrated to the entire world they are completely out of their depth with this crisis. It is now clear Europe, with these two leading is going to collapse.
Oliver also asserts that "Internationally, Merkel is seen as a strong and sometimes feared figure." You are kidding right? It is evident Merkel is seen internationally as utterly inept.
Oliver continues "Losing 'her' president and failure to produce a replacement would be hugely embarrassing to Merkel. She knows that many commentators would interpret it as the beginning of the end of her chancellorship. She might even conclude that it is better to leave a fatally damaged president in office if only to spare her political humiliation."
With respect, she does not need her president to humiliate her. During this crisis she has done a great job of humiliating herself by lurching from one stupid knee-jerk decision to another, demonstrating her hapless, inept, directionless leadership. I think it is fair to say that the developed world outside Europe is not fearful of her, but sniggering at her clumsy attempts at leadership
Why talk of a possible Greek default? (Why Merkozy is destined to fail, January 12) If they manage to negotiate away half their bonds, that's a default. Investors will have lost half their money. If they don't, investors will lose all their money. Greece has already defaulted. The EU maintains the pretence so it won't have to admit the EU banks are broke.
At which point Sarkozy out, Hollande in (Why Merkozy is destined to fail, January 12).
I guess that what make the new 'Merkozy' (Merkel-Sarkozy) 'Merde' (Merkel-Hollande)? Appropriate for when it all hits the fan, no doubt?
That was a very insightful piece Oliver. Thankyou (Why Merkozy is destined to fail, January 12).
Isn't it interesting that the only people who think Merkel has substance are Germans.
Why? Simply because her incompetence has not yet had the chance to show itself to the German electorate. This is because Germany is protected from the effects of the eurozone crisis because it effectively owns the eurozone lock, stock and barrel, and uses it to finance foreign exchange finance in favour of Germany.
Maybe the question that the European Union should be asking is whether the large nation states they have inherited from the past, particularly the Napoleonic era, are likely ever to be stable. Britain could be said to be leading the way in posing the question of a politically independent Scotland. Why not? Properly handled the transition could please many, and hurt no one (Why Merkozy is destined to fail, January 12).
When I visited Sicily a year ago, I found myself asking why on earth what could so easily be an island paradise, was being "ruled" from Rome. Italy as a unified state has never been particularly functional. The north has little in common with the south, and the centre has little in common with either. Regional governments operating within a larger Europe-wide federal model might be far more viable.
The same question could readily be raised about the Spanish and German regions, what do they really have in common with each other? In some cases, as in Spain, barely even language.
A federalised Europe would neatly fit in with greater regionalisation. Why shouldn't the Basques for example have their own regional government under a European federation, together with the Scots, the Northern Irish, Catalonia, Bavaria and so on?
Europe needs to think more imaginatively, working towards a new political structure for the entire continent, and a more united infrastructure and economy, combined with stronger regional parliaments. Ultimately such a European Constitutional structure must eventuate – so why not save a few centuries of pain and work deliberately towards it now?
The Euro mess is just another problem caused by a combination of disunity and competing nation states. Past problems included war between those clumsily evolved nation-states. Perhaps it is time to undo the damage the Napoleons, Bismarks, and Garibaldis of Europe caused, and to recreate Europe in a different form entirely.
An opportunity presents itself that should not be squandered.
Phil's idea has merit though a federation only works if it's also a fiscal union... the perennial discord between state governments and the federal seat of power that we see here in Australia and also America bodes ill for your idea of a european federation (Why Merkozy is destined to fail, January 12).
You can't go to France and not love it - this square slab of Europe with magnificent history and geography and culture. No wonder they fought wars over it. Sad to see how it is now, though in central Paris "What GFC?" would be your response. Everything there looks fine. But its confidence is down and its economy is struggling. It doesn't know what to do about its ethnic divisions (Why Merkozy is destined to fail, January 12).
It was described by (I think, and I paraphrase) Romania a couple of years ago as like a good looker who had not come to terms with ageing, wondering why the phone didn't ring. This was in response to a finger-wag from the Elysee about where Eastern Europe was going wrong.
Correctly, but sadly, Oliver Hartwich is ironic when he says "Merkozy, the celebrated rescue duo". France will be flat out cleaning up its own mess. It's not in a position to prop up anywhere else. This is all pretentious nonsense. I wonder what Merkel and Sarkozy actually talk about in their continual crisis chats.