France and Germany plan closer eurozone

By Quentin Peel in Berlin

France and Germany will present joint proposals in May for closer economic and monetary union in Europe, to stabilise and deepen integration in the eurozone, Angela Merkel, the German chancellor, announced in Berlin on Tuesday.

Speaking beside François Holland, French president, on the 50th anniversary of the Elysée treaty which cemented Franco-German relations in Europe, Ms Merkel said both governments would also ask employers and trade unions in their respective countries to come up with joint plans to boost competitiveness and growth.

While still short of detail on the precise content of their proposals, the Franco-German plans are intended as a clear signal of their intention to promote closer co-operation in the eurozone, before David Cameron, UK prime minister, delivers his own European speech on Wednesday calling for the repatriation of selected powers from Brussels.

The entire political elite of both countries, including both governments and parliaments, gathered in Berlin on Tuesday to hear speech after speech praising the process of closer European integration, driven by Franco-German co-operation.

In an attempt to counter criticism of the coolness of their own personal relationship, Ms Merkel, a conservative, and Mr Hollande, a socialist, also let it be known that they are now getting along much better.

After a small dinner party in a Berlin restaurant on Monday evening, close advisers said they now used the familiar “tu” and “Du” when chatting – a gesture intended to prove that their personal chemistry was better, in spite of coming from different political families.

Ms Merkel said: “It may be our best-kept secret...”

“You have undoubtedly noticed that we don’t belong to the same political party,” Mr Holland said. But he insisted: “There is a current between us that does not require any electricity to work.”

Ms Merkel said both were “very aware of our great responsibility” to tackle the economic crisis in the eurozone, to boost economic growth and reinforce European competitiveness.

Mr Hollande replied that both countries enjoyed an extraordinarily close relationship, closer than with any other neighbour and partner. “We see the best co-operation that there is in Europe,” he said, “but there is no doubt that it could be even better.”

In a joint “Berlin declaration” issued by the two governments, they stressed their common goal of boosting competitiveness, and involving the social partners – employers and employees – in the process of economic reform.

“The competitiveness of our economies is one of the keys to our prosperity and the protection of our economic and social model,” they said, reflecting Germany’s concern that all the national economies in Europe must reduce costs and improve productivity.

At the same time, the stress on more intensive involvement of employers and trade unions in devising reforms is a gesture to Mr Hollande, who wants to protect the welfare state from excessive deregulation.

The joint declaration also commits them to promote “ambitious new goals” for European policy, highlighting research and innovation, energy, transportation, industrial policy, the digital economy, defence and security. It specifically mentions the creation of a European public prosecutor.

It also spells out the common challenge of demographic change – one area where Berlin is conscious that France has a higher birth rate and a more successful family policy than Germany.

Copyright The Financial Times Limited 2013.