As the French Socialist leader extended his poll lead over Nicolas Sarkozy to 10 points on Fridaywith just over a week until the French vote, Merkel declared that his drive to reopen the EU's fiscal pact penalising spendthrift eurozone governments was futile.
"The fiscal pact has been negotiated, it has been signed by 25 government leaders, and has already been ratified by Portugal and Greece. Parliaments all over Europe are about to pass it. Ireland has a referendum on it at the end of May. It cannot be negotiated anew," Merkel told the WAZ media group.
But with governments across Europe falling victim to a backlash against austerity, the policy debate in Europe is shifting from German insistence on austerity towards a greater emphasis on boosting growth and creating jobs.
If he wins the French presidency on 6 May and also secures a parliamentary majority in June, Hollande and his team are committed to not ratifying the EU pact unless it is fine-tuned to include growth-boosting policies. The pact, a new rulebook for the eurozone, can come into force even if France does not ratify it, but this is seen as politically inconceivable.
Berlin's austerity drive, which is the main response to two years of euro meltdown and sovereign debt crisis, is exacting a high political price across Europe. The Dutch government collapsed this week over a failure to agree on spending cuts to comply with the new rules. Spain's credit rating was slashed on Thursday because the savage austerity there is defeating the chances of economic growth.
The Romanian government was ousted in a vote of no confidence on Friday triggered by opposition to budget cuts. The Czech government is fighting for its survival.
Echoing the sense that EU governments are being forced to change tack in response to public protest and electoral tactics, Herman Van Rompuy, who chairs EU summits as president of the European Council, wrote to EU leaders saying he may call a special summit dinner in Brussels in early June. "Over the past two and a half years the EU has had to react to the economic and financial crisis. This has not been easy and led to some frustration at times and strains," he said.
"We have had to deal with the urgent pressures of the sovereign debt crisis. The emphasis should now shift increasingly to prioritising measures that can boost growth and jobs."
Hollande was quick to respond robustly to Merkel's criticism. "It's not Germany that decides for the whole of Europe," he told French television.
The presidential frontrunner added that he was being encouraged in his challenge to Berlin by other EU leaders, "even the conservative ones".
Mariano Rajoy and Mario Monti, the prime ministers of Spain and Italy respectively, who have engaged in gargantuan reform efforts, are broadly supportive of the French challenge. The powerful head of the European Central Bank, Mario Draghi, also called this week for a "growth pact" to augment Berlin's fiscal treaty. All three, however, are also at pains to stress there is no alternative to "fiscal consolidation".
Merkel argued in her interview that her policies enjoy wide support among other EU leaders, but her fiscal pact proved unloved and the fall of the Dutch government deprives her of a key ally in the contest to shape the eurozone's future.
Asked what he would say to Merkel as the new French president, Hollande said: "I would tell her that the French people have made a choice, which envisages a renegotiation of the treaty."
With Hollande on the campaign trail and Merkel facing two key regional elections in Germany next month, part of the sparring may have been for public consumption.
While all the leaders, including Merkel, subscribe to the goal of generating growth, the dispute is over the means to that end. The Germans are strictly opposed to fiscal stimulus, relieving austerity, relaxing the rules, and piling up any more debt. Merkel's growing band of opponents argue that the austerity is making a wretched situation even more desperate, plunging Europe into a deflationary spiral of debt entrapment, high unemployment, sickly banks, and diminishing growth prospects.
But while the political arguments appear to be turning in Hollande's favour, he cannot substantively change the new regime. The fiscal pact has become the symbolic focus of the battle, but most of the new power and penalties contained in it became European law last December under a separate package of legislation that strengthens the European commission as the enforcer of budgetary and fiscal rigour. The Hollande camp is not talking about repealing any of this legislation.
Source: guardian
Author: Ian Traynor, Kate Connolly
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