7 June 2015

Hollande’s moment to shine as ‘Greece’s saviour’?

As today’s Eurozone leaders’ summit gets underway, much has already been said about how Germany will refuse to budge – leaving the other ‘driver of the European project’ – France – alone to temper Berlin’s insistence on fiscal discipline in order to keep Greece in the Eurozone, with other Eurozone countries taking the German line (or in some cases adopting an even tougher stance). French President François Hollande is Tsipras’s ‘last hope’ Le Monde wrote yesterday. A headline in today’s Financial Times reads, “Hollande seeks role as Greece’s Saviour,” while the Paris Correspondent of Germany’s Frankfurter Allgemeine Zeitung writes in Tuesday’s paper:

Reading between the lines the silent accusation that resonates against Berlin is that France – the older democracy – understands the crisis better.

Michaela Wiegel, Paris Correspondent, Frankfurter Allgemeine Zeitung, 7 July 2015

Hollande’s fails to paint different Eurozone vision

Yes, it’s true, the Franco-German axis is under strain (again). But Paris has always been more conciliatory towards Athens, largely due its own wish to loosen budgetary rules in the bloc. This should have been President Hollande’s big chance to put forward the case for ‘more solidarity’ in the form of looser fiscal rules. (Remember that he came into office on a promise to renegotiate the Fiscal Pact.)

Instead, Hollande has failed to show the decisive leadership needed to differentiate himself from Merkel, win allies and to push back against the ‘German vision’ for the Eurozone with its insistence on budget discipline and structural reforms. Indeed, some in France have been saying what Hollande himself dare not, calling on their President to use the Greek crisis to set out an alternative version of the Eurozone. Benoît Hamon, the former French Minister of Education, yesterday appealed to Hollande to take on Merkel, telling Agence France Presse:

Angela Merkel has lost, Germany has lost. [It is] an opportunity for François Hollande to resume leadership.

Benoît Hamon, AFP,  6 July 2015

Hamon added:

The nationalist and liberal forces in Europe have the same goal: removing Greece from the Eurozone, which would lead to the disintegration of Europe… We must resume talks with Athens, and address the question of the sustainability  of Greek debt and debt restructuring as a part of keeping Greece in the Eurozone. François Hollande, who wanted to weigh in on the European Institutions has a historic opportunity to do so, and to put it to the Europe that is not content with budgetary coordination.

Meanwhile, Michaela Wiegel, Paris Correspondent for Germany’s Frankfurter Allgemeine Zeitung writes that Hollande:”[privately] blames the German government  for  closing negotiations in recent days… He is representing the French Socialists as the ‘true Europeans’, who know “that Europe has always been founded on compromise.” A new poll by Odoxa for Le Parisien today shows that 55% of French support a Greek debt write down. (The same poll also shows, however, that 50% support a Grexit –  this is up from 39% a month ago, indicating how badly Greece’s reputation has been hit in the past five months.)

Perhaps Hollande tried. Le Monde yesterday reported that before the talks between Athens and its creditors broke down, Paris tabled proposals in June which took into account Athens’ insistence upon debt relief. Apparently, they were binned at the insistence of Germany. German financial daily Handelsblatt writes in its headline story today, “Merkel wants to swear Hollande to a shared path. The Chancellor wants to avoid, at any price, that she alone will bear responsibility for a possible Grexit.” And, sure enough during their joint statement yesterday, Hollande quoted almost verbatim what the Chancellor has been saying all along. With the world watching, Hollande told assembled press, “The door remains open [but] solidarity comes in exchange for responsibility.”

Allies for France?

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Nonetheless, this would have been a difficult one for France to find friends on. Not just because others would rather support Berlin as the Eurozone’s principle paymaster. But other Eurozone countries, are just as hard, or even harder, on Greece (notably the Baltics) for various reasons, including their own successful but difficult experiences with austerity and reform, and because their exposure to Greece has also risen throughout the crisis. 59% of Greek debt is now held by the Eurozone (see graph below). This means that looser rules for Greece at the expense of others is extremely unpopular – regardless of what Germany has to say about it. As the image above (currently on the front page of Die Welt Online shows), and as Greek daily Kathimerini reported earlier today, Greece has only had support from France and Cyprus, Italy has wavered.


150703GreekDebt2 itemprop=Hollande’s obvious ally should have been the Prime Minister of Italy, Matteo Renzi, who like Hollande believes in looser fiscal rules to govern the Eurozone. Instead, Hollande has dithered for five months, and last night he failed to invite Renzi to the dinner he held in Paris to discuss the Greek referendum result with Merkel –  Renzi was not impressed. Renzi has struck an unusually hawkish tone on Greece recently, and he has even sprung to the defence of the German handling of the Greek crisis, telling business daily Il Sole 24 Ore last week:

Compared to Angela Merkel, I have a different vision of the past ten years of European history…But blaming Germany for what’s happening in Greece is a comfortable alibi that doesn’t correspond to reality. Always putting the blame on the Germans can’t be a policy. It can boost morale, but it doesn’t boost the economy. Merkel has really tried to find a solution.

Matteo Renzi, Il Sole 24 Ore, 30 July 2015

If not now Hollande, then when?

Regardless of whose vision of the Eurozone should prevail, with Greece hanging on the precipice – what is needed now is a very un-European political proposition: clear and unanimous agreement. If Hollande was ever to have a chance of pushing through his vision for the Eurozone with conviction, he should have made his case forcefully, and with authority, during the past five months. If he cannot make his case for the Eurozone even as a Grexit looks imminent – the question that follows then is – when?

With Eurozone leaders arriving in Brussels tonight, it’s worth closing on broader note. Given the competing interests in the bloc, the Eurozone has long been able to muddle through with a series of fudges. Even if these fudges could not prevent ‘the next bad thing’ from happening – at the least they could delay it and prepare the ground. But in Greece, ‘the disaster’ has already happened: strict capital controls remain in place, the banks are closed, and the liquidity crunch is tightening. Greece may soon have to start printing its own money. This means that Greece is de facto already on its way out of the Eurozone. Unless the Eurozone can answer clearly whether or not Greece should remain in the bloc, and then take the necessary steps to follow: either a managed Grexit, or a third programme and bridge financing for Athens-  the Greek economy and people will continue to suffer as its economy hemorrhages.