Franco-German clash fears recede

Fears of a head-on clash between France’s new president and the German chancellor over the fiscal treaty retreated as concerns grew for the future of Greece in the eurozone.

Ireland does not want to be caught in the middle with a referendum on one version of the treaty, and a revised edition being battled over in Brussels.

But Germany’s Angela Merkel took some of the heat out of the situation yesterday saying she would welcome president-elect François Hollande “with open arms” when he comes to Berlin next week.

Mr Hollande’s aides have made it plain he is not seeking to reopen the entire treaty but is demanding it be accompanied by a growth and employment pact — which he would hope to get agreement on at the June EU leaders’ summit.

He is more likely to achieve his objective with the outpouring of support for his demand for growth policies to balance the austerity programme championed by Germany. Some German analysts warned that unless Ms Merkel found a way to compromise she risked being isolated.

She told journalists yesterday that while she would not agree to open up the treaty to renegotiation, she believed in growth as a path out of the debt crisis. “The discussion is not about whether we need budget consolidation or growth — it is absolutely clear we need both,” she said.

This opinion was echoed by the head of the IMF, Christine Lagarde, in Switzerland last night when she said; “Growth and stability are not mutually exclusive — it is not ‘either/or’, and we can design a path that reconciles them both”.

She urged indebted countries in Europe and elsewhere to reduce budget deficits only gradually to avoid further damaging their economies.

While many believe that while Ms Merkel and Mr Hollande will be pragmatic in relation to working to keep the euro and their countries stable, the big fear now rests in Greece.

The two pro-bailout parties were decimated in Sunday’s election, leaving them together holding just 149 of the 300 seats in parliament.


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