THREE POSSIBILITIES FOR FRANCO-GERMAN LEADERS

By Fiona Zumtobel

With soaring unemployment rates, industries collapsing, government budget deficits roaring and large social unrests the European Union and its path towards progress is looking extremely grim.

Germany’s Chancellor Angela Merkel and French President Francois Hollande do not seem to find consensus on how to steer Europe through these turbulent times. Germany’s strict views on Austerity and the centricity of the French State, makes a compromise difficult. Europe, nonetheless, can no longer wait for a compromise and therefore this policy paper will indicate three possible policies that France and Germany could take in order to guarantee the safety, survival and success of the European Project.

The Problems- ‘Vive La Difference’ between Merkel and Hollande

Problem (I) Personal Relations & Ideology

The relationship between two countries is often very dependent on the personal relationship that their presidents have with one another.

The relationship between Merkel and Hollande, was bound to have had rocky start when Angela Merkel openly campaigned for former ex president Nicolas Sarzoky, Hollande’s opponent during the 2012 election. With presidential elections, it is very difficult to estimate who will win therefore, if you are stuck in a Union with that country then, it seems only vital to stay neutral during presidential elections. Merkel prioritized ideology before the strategic friendship between France and Germany and therefore damaged EU relations.

Furthermore, when France elects a Socialist government, then it is very difficult to enforce Merkel’s proposed Austerity .The problem that remains however, how to “socially” fix a problems when your very own State is highly indebted and in the middle of  a severe economic downfall?

Problem (II) German Economic Success vs French Economic Weakness

Germany’s Economic success has automatically forced the Chancellor to become both politically and economically in charge of the European Union. France’s inability to keep up and, cut budget deficits to the agreed 3% of GDP automatically forces it to accept its inferiority.

Furthermore, France is at an unemployment rate of 11% whereas Germany is only at 5%. Germany’s has a Balance of Trade Surplus in contrast to France’s balance of trade deficit. All of these are factors that suggest that France is far behind Germany economically. Economic powers tend to rule World Politics. Examples of this are Great Britain during industrial revolution, United States after World War II until present, with an eager China on its way. If Germany is given the position of a leader, she will also want to dictate policy. Dictating policy alone is impossible to do when you have 27 other member states that might not like what you propose.

Problem (III) Geopolitics Interventionism vs Pacifism

Militarily, France is much more similar to Great Britain than it is to Germany. The “interventionist” France as opposed to “pacifist” Germany. The French intervention in Mali was greatly supported by Great Britain and rather frowned upon by Germany. On the other hand, if Germany would be interventionist like she was during WWI and WWI, I am sure that the World and especially, Europe would be too frightened and cautious to allow Germany to dictate European politics.

Policy I Labour/ Corporate Tax Reform in France

Policy (I) argues that the only way for German-Franco Relations to improve is if France becomes a stronger economic competitor for Germany. With a strong economic France, Germany will not be able to dictate policy by herself.

Policy (I) indicates a Labour and Tax Reform Policy, which would enable France to increase productivity and to cut unemployment rates through the removal of Overtime taxes, which has currently been put into place since Francois Holland has come to power.

The normal working week is 35 hours in France. When French citizens decide to work longer, either because they would like to make more money, or because they need to make more money to survive, then the French state must embrace these hard workers, rather than to tax them. When people get taxed on their extra work, then they are presumably, less likely to work, and with the unemployment benefits that France offers, rational man might decide not to work at all.

Policy (I) might increase budget deficits in the short term, but in the long term it will increase employment rates to the point where Government revenues are higher from the increased income tax it receives than before with the “overtime” taxes in place.

 In the long run, Policy (I) will therefore indicate marginal benefits exceeding marginal costs.

 Secondly, with a higher working population, the productivity levels of France could very well correct the balance of trade deficit.

Policy (I), also includes a decrease in Corporate taxes so that Firms in France are able to spend more money and 1) hire more workers and therefore reduce French unemployment rates, and 2) Increase Firms investment in technology and innovation to increase both productivity and the quality of their services. 3) French oversea companies that left France for tax purposes would re-allocate and produce domestically.

Policy (I) recognizes that France is under Socialist Rule and that social benefits are deeply embedded in the French system, therefore, Policy (I) does not discuss the reduction of Income Taxes, reducing trade union power, increasing the working week, and loosen the hire/fire process. Policy (I) only hopes to increase French productivity and increase the working population through mild tax reductions.

Policy (II) Collective Economics: A Banking Union Firmly Put Into Place

Talks of a Banking Union are already underway. However, Policy (II) hopes to enforce this Banking Union through a legally binding treaty, where all EU members must sign to enter or remain in the EU.

The idea was that a single supervisor and a bank-resolution mechanism works for Europe in a way, that would be better at handling large failing banks. Furthermore, a Banking union would also control the connection between failed banks, bailouts and budget deficits. What this Banking Union ultimately means is that countries share the risks of other countries banks collectively, as one.

In Policy (II) the single Supervisor would be selected in EU parliament, where each EU member State’s Government would select and send one representative. The representative with the most votes (A country cannot vote for his own representative) will carry out the duty and serve for a 2 year Term. International Lawyers would write up a binding treaty, where all countries that wish to enter or stay in the EU must sign.

Policy (II) argues that Sovereignty will have to be given up in order for a Banking Union to properly function. Facts and figures will be completely transparent, and decisions will not be left to member States. Therefore Policy (II) argues that member States must give up large chunk of their Sovereignty.

 Those nations  who wish to stay in the EU because of this adavantages ie) free movement of goods and peoples , must at same time bare the burden of  the costs that come with a properly organized and tightly run Union.

Following the cost/benefit analysis on the short term Germany would probably not want to sign and ratify this treaty. Any strong economic power would have ist reservations. Policy (II) is a cosmopolital model, which argues that for the EU to properly function and member states to regard eachother as equals, Sovereignty must ultimately be given up.

Policy (III) Educational and Cultural Reforms

Perhaps Tax Reforms are out of the question for France’s Hollande and A Banking Union cannot be put in practice by Merkel’s Germany. Therefore this policy paper includes Policy (III) that hopes to increase Franco-German through the implementation of Educational and Cultural Reforms that create a bond and sense of unity between all EU members, without losing cultural heritage.

Policy (III), argues for the Modernization of Education and Culture through the implementation of yearly educational forums and cultural events that will pinpoint the individual and collective advantages of strong European relations.

The educational forums will be similar to TED in the United States, where brilliant minds come together, present their ideas and later on debate amongst each other. Observers will be able to ask questions of their after the debates.

The themes of these forums will always try to defend the need for European Unity and the advantages of the European project. Guest speakers will identify the strengths and weaknesses of the European Union and will suggest diverse methods of eliminating or reducing European defaults.

The forums will be organized in European Capitals. Guest speakers will be paid by the European Commission for Education and Training. The European Commission will allow students from the EU to post online recommendations of what topics that they would like to have presented and discussed.

Policy (III) is a long-term solution to European Unity and in particular better franco-german relations. Problems will not magically disappear from the table but they will be brought to light and discussed by professional, where students can eagerly listen and learn. When you educate people to support European Unity, then European unity will be become a deeply embedded and important value to these people, which they will probably want for the rest of their lives.

Policy (III) also introduces yearly Cultural Art Fairs to support young European artists. The European Commission of Culture will organize events to promote European integration in large well-known spaces eg) Grand Palais to attract successful galleries and clients. Not only does these give business opportunities for our future generations, but also it also visually educates visitors on the importance of European integration and the need of a pro-european mindset.

Policy (III) requires a lot of funding, which will be come directly from member states and hopefully private donations.

Policy Recommendation

Franco-German relations are on the brink of collapse. A policy is required to improve relations not only for both countries individually but for the EU entirely.

This policy paper introduces three different policies whose aim is to improve European relations, with the particular focus on Franco-German relations.

Policy (I) will help strengthen the French domestic economy. With a strong Economic France, Germany will not be able to dictate policy alone. Also, a Strong French economy will boost the EU average. Policy (I) is relatively easy to put in place and does not risk major social unrest or strikes for the French population.

Policy (II) argues for the implementation of a Banking Union, which is perhaps the most cosmopolitan theory out of the three proposed. Policy (II) requires transparency and cooperation. Nations will automatically have to give up more of their sovereign power. A binding treaty for a Banking Union will be very difficult to put in place for strong economic powers.

At the moment, France is strongly pushing for a Banking Union, perhaps because it is not economically as strong as Germany and thus would not loose as much with this proposal. However, as soon as France re-builds its domestic economy, this paper presumes it will be less likely to want to enter into a Banking Union, most especially if these mean of giving up its proud sovereignty.

Policy (III) proposes strong EU relations through educational conferences and cultural events. Policy (III) hopes to enlighten European people, on a psychological/emotional and rational level of the grave importance and beauty of the European Union. Policy (III) is a very optimistic model that might one-day experience great success. However, this policy requires large funds, which is very difficult to get from in a time of crisis.

To conclude this policy paper therefore, I would recommend the implementation of Policy (I). Once the French economy is revived one could perhaps consider investing in Policy (III) to guarantee strong Franco-German and EU relations for the future well-being of the Europe as one.