German Chancellor Merkel is one of the
outstanding leaders of our era. She leads the world's fourth largest
economy, which is still the locomotive for Europe. Recent state
elections and polls leave little doubt that barring some kind of shock, she will be re-elected as
Chancellor in September. It will be her fourth term.
Macron is the youngest
president in modern French history and has not held a public office until now. He is the fourth French president during Merkel's
tenure. When Macron was born (1977), Angela Kasner married a physics student, Ulrich Merkel. They were
divorced in 1982 as Macron was getting ready to attend school.
Chancellor Merkel was raised
in East Germany, though born in the West. When able to, she joined Germany's
center-right party, the Christian Democrat Union (CDU). Macron comes out France's Socialist Party and was
Economic Minister under Hollande, before breaking away to form his own party. Among his first acts as
President, Macron named the Republican mayor and member of parliament, Philippe
as Prime Minister. Reaching across to a Republican is a bold move, and
suggests a dramatic change in the political landscape in France.
presidency did the Socialist Party much harm, and Macron's departure split the
political realignment cannot be limited to the center-left
but has to involve the center-right. Next month's parliamentary election
will be the first test if Macron has been successful in re-orienting French
politics. The appointment of Philippe was not just a cynical move of
electoral posturing, but also seems to reflect Macron who was part of what
might be considered the business-wing of
the Socialists or the realos faction, which is more interested in shaping
France than adhering to an old dogma.
Macron's agenda appears
two-fold. The first is political reforms to
raise the bar of ethics. He wants to ban the hiring of family members by government officials. This was Fillon's downfall. Fillon was
the odds on favorite but was snared in a scandal of hiring family
members from which he could not extricate himself.
Macron ascendancy is a bit
like UK Prime Minister May. Macron's electoral success required
his adversary Fillon to shoot himself in the foot. May too benefited when
the other claims on Tory leaderships faltered at their own doing. Unlike
May, though, Macron's ambition was clear before
Fillon's scandal. The inability of
the French left to unite behind a single candidate also made possible Macron's victory.
Second, and ultimately,
Maron's success will depend on his
ability to revive the French economy. The French economy has been a lagged for
several years. The unemployment rate is near 10%, more than twice the UK
and US rate. The German unemployment rate is below 6%, and the lowest
since unification. Macron will likely emphasize
labor market reforms and tax cuts.
Europe was sometimes compared with an airplane and Germany, and France were the pilot and co-pilot. But Hollande's ineptitude and France's loss of competitiveness in recent years meant the co-pilot was missing. If
France is to regain its place, it needs to get its economic house in order.
That is the only way to be taken seriously in Berlin and Brussels.
Europe requires a stronger
France. Europe works best when there is a
healthy tension between the creditors and debtors. Germany represents the
interests of the creditors well. However, a strong voice for the
debtors has been lost in recent years, allowing dangerous asymmetries to
emerge. France needs to be strong to check the
creditors and Germany. Otherwise, there is no French glove to
house the German fist.
The institutional check on
creditors has come from the ECB, which arguably has filled the vacuum left by
the weakening France. Recall many had expected
then-Bundesbank President Weber to succeed Trichet at the helm of the ECB.
Weber lost an early vote on the unorthodox
monetary policy at the ECB and quit. That allowed Draghi to become the
ECB President. The way Europe does things,
it would most likely be a German turn when Draghi's term is up in 2019. It
is important that another check on the creditors emerges as the ECB under
German leadership cannot be counted on to provide the balance. France's
leadership will be vital.
Although EU sentiment has
edged higher in most countries since the UK referendum last June, and the
populist-nationalists have been turned back at every opportunity, the
democratic deficit remains. European leadership is well aware of it
challenges going forward. A new roadmap for Europe post-Brexit is needed,
and France, more than Germany, may have the vision. Merkel may be a great
statesman, but her vision comes, they say, from mountain climbing, where only
the next foothold and handhold are important.
The June parliamentary
elections in France will determine Macron's honeymoon, but the early signs are
positive. Macron knows that reducing France's
budget deficit and bringing it back to
the Stability and Growth Pact requirements is a necessary precondition for
being taken seriously on EU reform. It seems clear that deep reform will
require treaty changes, but the
sequencing is important and won't be lost