19 February 2014

Franco-German summit in Paris: For "the revival of Europe"

As reported by EUObserver, French President François Hollande had announced that his meeting with German Chancellor Angela Merkel and her ministers would launch three projects: harmonisation of French and German corporate tax; the creation of a joint company specialising in renewable energy; and "a Franco-German partnership for European defence". Harking back to the idea of France and Germany as the engine of EU policy-making, he added that this summit would also "establish a basic principle: namely, that our governments are to collaborate from an early stage on all large projects". 

At a press conference in January, the French president said that the EU should move ahead with plans for economic and monetary union, including giving the eurozone a "real government, aiming for growth and employment". France would like to see the leaders of the countries of the eurozone agreeing common policies on economic issues, while Germany fears France could use this to win support for slower economic reform, reports European Voice (subscription).

In the context of the planned initiative for economic and social convergence between France and Germany, Hollande said that Germany's plan to introduce a minimum wage was a "first step in this direction". The two countries would also work to harmonise tax rules, he said. Angela Merkel arrived at midday at the Elysée for a one-hour interview with Mr Hollande, while ministers of both countries came together for a series of bilateral meetings in the afternoon. 

Official Communiqué

"France and Germany have the common objective of completing the Banking Union and considering it a priority to obtain a final agreement with the European Parliament on the Single Resolution Mechanism (SRM) before the European elections on the basis of the general outlines set down by the Council in December, and in a complementary manner, obtaining a final political agreement on the instrument of direct recapitalisation by the ESM in March.

Monetary Union should be complemented by a strong economic union with a clear and robust architecture. Germany and France will continue to argue this point in the line with their statement of 30 May 2013 (in French). This development must be accompanied by the preservation of the unity and cohesion of the European Union as a whole."

• Completion of the Banking Union (Agreement on single resolution mechanism before European elections and political agreement on the instrument by the direct recapitalisation by the ESM in March)
• Common agenda for competitiveness, growth and employment
• Continuation of deepening EMU, pursue the above objectives
• Common action of the whole of Europe on priorities issues such as climate and energy, defense and border management.

Furthermore the two leaders announced the plans for a Franco-German energy company that should draw on German leadership in the renewable energy sector and French strength in energy storage and networks.

On defence, Hollande said that plans for a Franco-German initiative would go further than the existing Franco-German brigade – a 4,000-strong force based in Strasbourg. "We need to demonstrate our joint responsibility for global peace and security", he said. It is planned to use this troup in Mali in order to alleviate the task of the present Frech troops, writes Spiegel.

Official decisions of the summit (in French) © Présidence de la République française

Federal government press release: Deepening cooperation

At Hollande and Merkel's meeting with Commission President Barroso and the European Roundtable of Industrialists, Barroso said he welcomed the outcome of the Franco-German summit, especially in terms of industrial policy and the development of an increasingly interconnected energy market.

"I would like to express my appreciation for the efforts and commitment of President Hollande for renewed competitiveness in France, and for the commitment of Chancellor Merkel in Germany, for investment, including investment in infrastructure. All this is also a way to help businesses and promote competitiveness in Europe", he said. 

Full speech © European Commission

FTT

Reuters reported that Germany and France would lead a face-saving bid to revive the flagging project to tax financial transactions in 11 eurozone countries and allay fears it could hamper economic recovery. The tax is expected to be scaled back from an original plan to introduce it from January to raise €35 billion annually to make banks pay back some of the money received in the 2007-2009 financial crisis.

"I hope that we take a step forward on that", German Finance Minister Wolfgang Schäuble was quoted by Bloomberg before the meeting. "We may possibly have to move ahead step by step", he told journalists, in an apparent reference to a phased introduction of the tax. The negotiations are seen as France seeking to rein in German ambitions for a tax on financial transactions, urging a more "realistic" levy.

"I prefer an imperfect tax to no tax at all", Hollande said at a joint news conference with the German Chancellor as the two countries renewed their push for the levy. "Purism can be a way to avoid implementation." Merkel, whose government has swung behind French calls to start off with a limited European tax on financial transactions, said work "is being moved forward very intensively" and that the momentum might sweep along holdouts, reports Bloomberg. Lawmakers from Germany’s two governing parties have signalled that Merkel’s coalition is ready to accept a levy on stock trade as part of a first step if a broader approach including derivatives and other products isn’t acceptable to German partners right now. "Should this tax be applied gradually?", Hollande questioned, "our ministers will decide about that. The principle is that the tax should be implemented. Because if we are looking for a perfect tool, I know some who will delve very deep into details to make sure the tax will never exist." France and Germany have pledged to reach a deal on a European financial transaction tax by the end of May, elaborated the Financial Times (subscription).

Over the last couple of months, the atmophere between French and German leadership is said to have improved considerably. Hollande's new, entrepreneur-friendly reform course was well received in Berlin. And Paris registered with satisfaction the German political realignment - not least because of the government involvement of the SPD in Berlin, reports Welt.