New life for the Franco-German axis

Date: 17/12/1998

By Tim Jones

IF 1998 had ended in October, the political development of the EU would have been seen in a wholly different light.

Before Gerhard Schröder and his Neue Mitte Social Democrats found their feet last month, everyone was talking about a shift in the European balance of power.

Those who witnessed the humbling of former German Chancellor Helmut Kohl at the Brussels euro summit in May believed the writing was on the wall from that moment on. The Franco-German axis had been irreparably damaged and Kohl's successor, who was remodelling himself as a Blair/Clinton-style moderniser, would finish it off.

From now on, the EU would be run by a Berlin-London-Paris motor. French President Jacques Chirac took advantage of Kohl's weakness in the polls and his growing need to pacify pressure groups back home when he drove the EU to the brink over the presidency of the European Central Bank.

The two men publicly kissed and made up at a bilateral meeting a few days later, and jointly penned a letter to the Cardiff summit in June calling for a more relevant and less distant EU. But the love had gone out of the marriage and the stage was set for Schröder to end it.

Less than two months later, the picture has changed dramatically. The Franco-German relationship has not just survived, but has been strengthened. Within days of his election victory, Schröder travelled to Paris and was seduced by the Elysée Palace's great charmer.

There has indeed been a shift in the balance of power in Europe, but this has happened within Bonn and Paris. The diplomatic alliance between Kohl and the Elysée has been replaced by a new and potentially much more powerful link between political soul mates: Schröder, Finance Minister Oskar Lafontaine and Foreign Minister Joschka Fischer in the Bonn corner and Chirac's Premier Lionel Jospin and Finance Minister Dominique Strauss-Kahn in Paris.

The deceptively 'nice' Jospin, who so effectively savaged an opponent in the national assembly last week that she left the building in tears, has effectively refought and won the 1995 presidential election.

For now, the French and German governments could hardly be closer. For the first time in 16 years, they share an economic world view.

Two years ago, Chirac fought a lonely rearguard action against Bonn's tough budgetary rules for the single currency area and the European Commission's proposal to prise open its postal services and energy markets.

If Lafontaine or his Economic Affairs Minister Werner Müller had been around then, Chirac could have slept easy in his bed.

The French political classes, never enthusiastic free-market capitalists at the best of times, decided to draw a line in the sand this year. They had swallowed the 1994 deal which ended the Uruguay Round of global trade talks, the growth and stability pact, and endless liberalisation initiatives from the Commission. It was time for this 'liberalism' to end.

The highest-profile victim of this reaction was Trade Commissioner Sir Leon Brittan and his treasured New Transatlantic Market-place. The fact that NTM was also the nickname for rap artists Nique Ta Mère only helped to fuel French antagonism to the project. Within weeks, the acronym was not even a memory.

Having freed up the telecommunications and aviation markets over the past two years, the French carried out their last commitment with bad grace. The parliament approved the legal bare minimum of electricity liberalisation with just six weeks to spare before the EU market opens in February 1999, while almost everywhere else governments were being more ambitious.

Müller's comments, on taking office, that Deutsche Telekom had been unfairly disadvantaged in the new liberalised phone markets was revealing of the changed mood in Germany.

The postal market has changed beyond all recognition through commercial rather than governmental pressure, with Deutsche Post and the Netherlands' TNT Post leading the pack.

The German authorities will not backtrack on ambitious postal, rail and telecoms market-opening plans at home, but they are much more understanding of French scepticism than the Kohl team was.

UK PRIME Minister Tony Blair has seen his great prize swiped from his hands at the last moment. He had worked so hard to insinuate himself between the French and Germans, and lead the EU along the path of free markets with a human face.

Blair has struggled to avoid being outflanked. He appointed his chief fixer Peter Mandelson to a joint committee with Schröder's equivalent, Bodo Hombach, to explore the common features of the Neue Mitte and the 'Third Way'. He held a series of bilateral summits with Chirac and Jospin, and put together a joint statement on defence cooperation - one in the eye for the pacifistic Germans.

But it was never the same as the Paris-Bonn double act. When London published a Blair-Schröder 'joint declaration' on tax policy last week, the German chancellor's office asked: "What joint declaration?" It turned out that Schröder's commitment to the statement had been quarter-hearted.

Try as they might, the British cannot quite get it on the act, although the splendid isolation of the Conservative years came to a symbolic end in October when farm ministers, satisfied that the threat of BSE had been dealt with in the UK, agreed to lift the 30-month-old ban on British beef exports.

In desperation, Blair turned to the right-wing Spanish government for support and found it on their common approach to job creation.

In general, however, Madrid continued its lone-star stance in the Union, standing in isolation against the Commission's plans in the Agenda 2000 package to keep the lid on spending while the EU expands to the East.

When pressure began to grow for a real-terms freeze in the Union's budget for 2000 and 2006, there was opposition from Portugal, Ireland and Greece; but Spain was the leader of the gang.

The EU has got used to Spanish assertiveness. Much more shocking was the increasingly tough approach taken by the normally quiescent Dutch.

Prime Minister Wim Kok held the line in support of his candidate for the ECB presidency Wim Duisenberg, and his government opened up the debate on immigration rules, threatened to sue the Commission when it slapped anti-dumping duties on Asian cotton and stood fast with the Germans in favour of an EU budget freeze.

POLITICAL power for the Greens in Germany symbolised a coming of age of the environmental movement in the Union or, as some green campaigners see it, the betrayal of their cause by the careerist Fischer.

Champions of the environmentalists' policies made significant gains in EU politics this year, even before the Greens came to power in Bonn.

A round of tough talking between the Union institutions resulted in a raft of new laws to cut air pollution from cars - a package known as the 'Auto-Oil' programme - and genuine progress was made in introducing an (albeit minimalist) tax on energy consumption.

The process of expanding the Union to the East also went remarkably smoothly, but that was mostly because very little happened. Six countries have been given first-wave status and a bunch of pretenders - the most hopeful of which are Latvia and Malta - are begging to be allowed on to its crest.

The real bargaining will begin next year.

Feature forms part of the European Voice 'Review of the Year'.