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Merkel and Hollande Put on Show of Unity as Economies Diverge

January 22, 2013

President Francois Hollande and Chancellor Angela Merkel

President Francois Hollande speaks with Chancellor Angela Merkel as they pose in front of the Brandenburg Gate as they arrive at the French Embassy in Berlin. Photographer: Odd Andersen/AFP/Getty Images

Chancellor Angela Merkel and President Francois Hollande put on a show of unity to mark a half century of Franco-German cooperation even as economic malaise in the euro area exposes divergences between the two.

The leaders of Europe’s two biggest economies met in Berlin today to celebrate the 50th anniversary of the Elysee Treaty, which sealed the countries’ cooperation after World War II. The two said they’ll forge a common approach to stabilize the 17- member euro area by May.

“We’re aware of our great responsibility to improve the situation in the European Union and to overcome the euro crisis,” Merkel said alongside Hollande. The French leader added: “We have this friendship that we have to make work.”

The joint overture at wresting the euro area out of crisis comes as the two countries’ economies head in opposite directions, with France’s unemployment approaching a euro-era record and German joblessness near a two-decade low. Still, the leaders went on to deliver speeches in parliament marking the historic embrace between West German Chancellor Konrad Adenauer and France’s Charles de Gaulle in 1963.

“We must go beyond our friendship to open up new ambitions,” Hollande told German and French lawmakers in a joint session of parliament in Germany’s lower house, or Bundestag. “We are ready to talk to anyone, to hear any ideas, from those who want to go further in European construction.”

Debt Crisis

Franco-German proposals to address the three-year-old debt crisis will plot a course toward closer economic cooperation and bind in the bloc’s employers and unions, Merkel said. The measures will be discussed at a June European Union summit.

Merkel and Hollande have struggled to reach agreement on the crisis as the French leader has worked to assemble a counterweight to Germany’s pro-austerity policies while allies of the German leader have urged Hollande to move more quickly on overhauling France’s labor market.

The two today sought to project a functional working relationship after Hollande’s predecessor, Nicolas Sarkozy, aligned himself with the chancellor enough to give rise to the term “Merkozy” to describe the duo.

Merkel openly backed Sarkozy over Hollande during last year’s presidential elections in France, while Hollande has met with leaders of the German opposition Social Democratic Party in Paris. The French leader championed a plan opposed by Merkel to pool debt, while she has publicly singled out France’s rising unit labor costs as part of the region’s problems.

‘Not Easy’

“What’s not easy is to persuade her -- that’s not very easy,” Hollande told reporters. “But the chemistry works between us, a current runs without having to tap more power.”

“It’s one of our biggest secrets that the chemistry works, so that we can work calmly together,” Merkel said.

As the two work to improve personal ties, their economies are displaying differing challenges.

Hollande’s government has confronted sluggish growth and a 10.3 percent unemployment rate as companies such as PSA Peugeot Citroen (UG) and Alcatel-Lucent SA (ALU) 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. Germany’s unemployment rate was 6.9 percent in December.

“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.

To contact the reporters on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net; Gregory Viscusi at gviscusi@bloomberg.net

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


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