Bloomberg News

Merkel, Hollande EU Unity Pledge Fails to Stretch to Bank Union

September 22, 2012

Chancellor Angela Merkel and President Francois Hollande’s appeal for German-French unity to tackle Europe’s ills lasted all of three hours as they disagreed over closer integration of the region’s banking system.

The two leaders, marking Franco-German reconciliation after World War II, delivered back-to-back speeches in which they hailed their mutual ties, tried out each other’s language and pledged to work together for a more unified Europe to defeat the financial crisis. The bonhomie broke down at a subsequent press conference when they failed to mask their differences on a planned “banking union” meant to achieve that end.

“The earlier, the better,” Hollande told reporters in the German town of Asperg yesterday, saying that banking union is “an important step in our targets” with a goal of implementation by year’s end. Merkel, standing alongside, declined to set a target date, saying there’s no point doing something fast if it then doesn’t work.

The disagreement was the only point of public discord during an occasion meant to stress the Franco-German alliance that Hollande said was “the heart of Europe” leading the fight against the debt crisis in the 17-nation euro area. For all the entente, the leaders of Europe’s two biggest economies remain at odds on the pace of banking union and on whether Spain should seek a sovereign bailout, plus the conditions that would apply.

Schaeuble Criticism

German Finance Minister Wolfgang Schaeuble led criticism of the euro region’s rush toward common bank oversight at a meeting of European Union finance ministers in Cyprus this month. Germany has raised doubts about plans backed by France, Spain and Italy to hand the European Central Bank oversight powers over all banks in the euro area, and to do so by Jan. 1.

Financial markets “that are watching Europe want to see results” on banking union, Merkel said. “That’s why we say it has to be thorough, the quality has to be good and then we’ll see how long it takes.” At the same time, the goal is to “work as quickly as possible.”

With decisions looming on Greece’s progress in meeting aid targets, the sustainability of Spain’s finances and the mechanics of pressing for closer European integration, Merkel and Hollande are making efforts to get to grips with their differing political outlooks. The two have struggled to find common ground after Hollande won election in May on a platform of opposition to her austerity-first solution to the debt crisis and she publicly backed his opponent, Nicolas Sarkozy.

EADS-BAe Questions

The German and French leaders agreed to press ahead with their governments’ review of the planned merger of European Aeronautic, Defence & Space Co. and BAE Systems Plc. Hollande said that “questions and verifications” will be conducted in the coming days. “Jobs, industrial strategy, defense, interests of both our countries are at stake,” he said.

In his earlier speech, Hollande appealed to Merkel to join with France in pushing for closer European union, saying Europe is on the verge of a “new frontier” that can only be crossed by moving toward fiscal, banking, social and political union.

“We must act together or we risk being swept away in each of our nations, by skepticism, selfishness and populism,” Hollande said at the 18th-century Ludwigsburg castle outside the city of Stuttgart.

Charles de Gaulle

The ceremony marked 50 years since a 1962 speech to German youth at the same location by then French President Charles de Gaulle, the wartime leader who liberated France from Nazi German occupation and founded the country’s Fifth Republic. The chateau was the residence of the dukes of Wuerttemberg, a region that is now part of Baden-Wuerttemberg, the state that is home to world- beating German companies such as Porsche AG, Daimler AG and SAP.

In a sign of reconciliation after the third German-French war since 1871, de Gaulle held his speech in German, congratulating young Germans for being “children of a great people -- yes, a great people -- that has sometimes, during the course of its history, committed great mistakes.”

Hollande and Merkel echoed De Gaulle’s words and delivered sections of their respective speeches in the other’s language, Merkel praising the assembled youth in French and Hollande stumbling over the German word for “friendship.”

Germany and France must nurture their ties, as “good and trusting relations are not a given,” Merkel said. “We are working to make Europe sustainably healthy,” she said. “Germany and France have a special responsibility in that regard.”

Hollande compared Germany and France to an elderly couple who depend upon each other with a friendship that “sometimes loses its way” yet is mutually “essential.” To appreciate how precious the relationship is, “we have the duty to light up our flame every day.”

Merkel, asked about her relationship with Hollande, said they are “friendly.” Hollande shrugged off a question about the closeness between the German chancellor and his predecessor that led to them being dubbed “Merkozy.” He refused to bless the suggestion offered: “Merkhollande.”

“We don’t need to put our surnames together to put a name on European policies,” Hollande said. “It’s not necessary.”

To contact the reporters on this story: Tony Czuczka in Ludwigsburg, Germany via aczuczka@bloomberg.net; Helene Fouquet in Ludwigsburg, Germany via at hfouquet1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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