Hollande’s first act: convincing Merkel to change course

The newly elected French President, François Hollande, greets the Eurogroup chairman and Luxembourg’s Prime Minister Jean-Claude Juncker (Getty Images)

François Hollande’s first act as French president next week will be to fly to Berlin to try to convince Chancellor Angela Merkel to abandon her all-stick-and-no-carrot approach to the European economic crisis.

The first meeting between the Chancellor and the new French President was brought forward today to Tuesday afternoon – immediately after Mr Hollande’s inauguration ceremony in the Elysée Palace.

The meeting, provisionally scheduled for Wednesday, was originally described by sources close to Mr Hollande as “just a handshake” — in other words a preliminary meeting for the TV cameras rather than a true negotiation. The pace of events in Greece and Spain, however, and the deepening crisis in Europe have forced Mr Hollande and Ms Merkel to accelerate and upgrade their political courtship.

Mr Hollande now plans to fly to Berlin immediately after his swearing ceremony in Paris and remain for lengthy talks, including a press conference and a working dinner.

The French president elect has already been reaching out to other senior figures in the European Union in an attempt to win backing for his plan to shift from an “all-austerity” approach to the euro crisis to one partly based on large projects to stimulate growth.

In Paris today he met the Luxembourg Prime Minister, Jean-Claude Juncker, who chairs the Eurogroup meetings of the countries which use the euro. Their meeting was described by the Hollande camp as “friendly and frank”.

On Wednesday, Mr Hollande had what were described as “lengthy, profound and friendly” talks with Herman van Rompuy, the President of the European Council (the summits of EU heads of state and government).

Mr Hollande will seek to reassure Ms Merkel that he has no plans to abandon the fiscal discipline and deficit-cutting set out in the treaty agreed by 25 out of 27 EU countries in March. He insists, however, that EU countries must agree an additional protocol or treaty setting out multi-billion euro infrastructure projects to kick-start growth.

How these projects would be funded remains unclear or creatively vague. Mr Hollande has spoken of euro bonds – or loans given or guaranteed by the European Central Bank. This idea was once again rejected by Ms Merkel in a speech to the Bundestag today.

However, the Hollande camp – and the European Commission – have also spoken of something called “project bonds”, essentially euro bonds by another name. These would be issued by the European Investment Bank, with or without ECB backing, and could, with private participation, amount to at least €180bn.