• STRATFOR ANALYSIS

    Internal instability will challenge Franco-German alliance

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    The impersonal forces of geography have given Franco-German ties a central role in Western European history since at least the Middle Ages. Most of Europe’s political, economic and military developments can be understood through this bilateral relationship, which is conditioned by France and Germany’s internal imperatives.

    In modern Europe, the relationship between France and Germany lies at the core of the European Union. The two nations have a stake in EU survival and, because of this, remain dedicated to preserving their alliance. The stability of this alliance, however, is troubled by the political and economic crisis in France. and as this crisis deepens, it will become increasingly difficult for Paris and Berlin to maintain these ties. France is likely to face new waves of social unrest in the coming months, threatening the country’s political stability.

    France’s primary geopolitical imperative is to protect itself from attacks across the open terrain of the North European Plain. The Franco-German relationship has traditionally been defined by a mutual fear of invasion. This has led to a number of military conflicts, beginning in the mid-17th century when French King Louis XIV invaded German lands east of the Rhine and culminating in Adolf Hitler’s occupation of France during World War II. After the war, France turned to a strategy of political and economic integration with Germany as a form of protection, effectively neutralizing its rival through shared Continental leadership.

    Another aspect of France’s grand strategy is to remain the dominant political and military power in Continental Europe. Recent examples of this strategy include Paris’ growing involvement in Africa, with interventions in the Central African Republic and in Mali, and its willingness in late 2013 to support airstrikes against Syria. These moves preserve French influence over former colonies and its status as a key military power in Europe, especially at a time when the United Kingdom is less interested in military adventures abroad.

    Some German imperatives align with those of France. Germany also wants to secure its position on the North European Plain and has sought to achieve this by becoming the Continent’s most technologically, bureaucratically and economically advanced nation while reassuring France that it is no longer a threat by making political concessions on EU management. Germany has moved to reshape the eurozone to serve its needs, while preserving a co-leadership structure with France.

    The eurozone is central to the Franco-German alliance. The common currency is vital for German stability because it fuels the nation’s export-driven economy and traps its main trade partners within the same currency area. The euro’s current strength hurts the French economy, but it allows France to oversee German actions and have a say in the political management of the European Union.

    These shared interests are the foundation of EU resiliency. In order to manage the European crisis, France made important political sacrifices, such as accepting enhanced mechanisms for eurozone fiscal monitoring and supporting German-imposed austerity measures in peripheral countries. Paris has also accepted a continual trade deficit with Germany and a progressive loss of competitiveness, only partially explained by the value of the euro. For its part, Berlin has supported unpopular bailouts for peripheral countries, absorbed a landslide of immigrants from southern and southeastern Europe and pursued an ambiguous policy that combines demands for structural reforms with tolerance for missed fiscal targets in the European periphery.

    The German management of French decline
    In spite of these common interests, stress on the Franco-German alliance is growing. Berlin is facing increasing domestic resistance to the process of Continental integration. Institutions from the Constitutional Court to the Bundesbank are concerned about Germany’s weakening national sovereignty, and political parties that reject the euro and immigration are gaining popularity. France’s political situation is considerably more volatile, and unemployment is on the rise at the same time that popular support for the government is at record lows. French voters tie these anti-establishment sentiments to anti-EU sentiments, and a growing number of French voters want to leave the eurozone.

    Paris needs three things to cope with its increasingly volatile political situation. First, it wants a weaker euro to bolster French exports. On the surface Berlin rejects this, but a recent European Central Bank announcement that it will loosen monetary policy was unanimously approved, meaning that the Bundesbank gave its support. This suggests that Berlin is willing to accept expansionist policies, at least while inflation remains low. Second, Paris wants softer deficit targets and more time to apply reforms. Despite their rhetorical opposition, the Germans have accepted this idea for at least the past two years. The European Commission has repeatedly granted countries in the eurozone periphery softer deficit targets. France has been criticized and threatened by Brussels, but never punished. Third, and most important, France wants more protectionism and a true fiscal union that redistributes resources from Europe’s wealthy north to its less prosperous south. This precludes free trade agreements, especially with the United States, and includes the use of EU funds for corporate subsidies and incentives for job creation.

    France’s proposals directly contradict Germany’s economic interests, which are bolstered by free trade and a lack of protectionism. The German government has also built a political strategy around criticism of southern Europe, which creates challenges to accepting a system of fiscal transfers to these nations.

    In spite of domestic discomfort with events in the eurozone, Berlin is unlikely to see significant domestic problems in the coming months. Unemployment levels are at a record low and general elections in late 2013 gave the conservative Christian Democratic Union a landslide victory. Chancellor Angela Merkel faces contradictory pressure from the conservative wing of her party and from her progressive allies in the Social Democratic Party, but her political leadership is not at stake.

    In the long run, however, Germany will find it difficult to protect its domestic interests while preserving its alliance with France. It is becoming increasingly apparent to Berlin that eventually the Germans will have to commit their own wealth if they are to avoid socio-economic catastrophe in Europe. Since the beginning of the European crisis, Germany has managed to balance protecting its own interests and managing French decline, but that equilibrium will prove increasingly hard to sustain. If Berlin wants its meaningful European leadership, it must bear the financial burden of that leadership.

    France’s rising internal unrest
    With Berlin’s political situation set to remain calm in the near term, France is the country to watch. The French political system has been designed for stability, with a five-year presidency and a two-round electoral system. France’s ruling Socialist Party is uncomfortable with some of President Francois Hollande’s policies, but is not interested in calling early elections because it faces likely defeat. Elections do not need to be held until April-May 2017, meaning that Hollande’s position is not necessarily at stake, although his government will likely become increasingly inefficient. He will instead probably resort to Cabinet reshuffles or household and corporate tax breaks before seriously considering early parliamentary elections.

    France, however, is in the midst of slow political transformation. The nation faces a crisis of leadership, with both the ruling Socialists and opposition Union for a Popular Movement dealing with internal fractures. Nationalism is on the rise, which will likely lead to measures aimed at appeasing nationalists that could include stricter requirements for immigrant access to welfare benefits and more government intervention to prevent foreign companies from acquiring key domestic businesses.

    But the real threat to the French government and the eurozone will come from the streets rather than the parliament. Similar levels of unemployment between the late 1990s and the early 2000s led to riots in the multi-ethnic suburbs, the far-right’s advancement to the second round of the 2003 presidential elections and a vote against the 2005 European Constitution. Former President Jacques Chirac managed to complete his two terms in office, but since that time reforms have been difficult, with his successor Nicolas Sarkozy barely managing to pass pension reform — probably the only significant reform in his five years in office.

    Hollande is in a weaker position than his predecessors, because few in the political system trust the government’s ability to overcome the current political and economic crisis. Hollande’s problem is a combination of real and perceived weakness. At the same time, the Euroskeptical National Front has succeeded in presenting itself as a valid electoral alternative for a growing number of French voters while grassroots movements are demonstrably willing to take to the streets and oppose the government.

    These overlapping issues mean that the fourth quarter of 2014 and first quarter of 2015 will be key. The period from July to September is usually quiet in France, because many take their annual vacation in these months, and the parliament enters a summer recess. The real threat for the stability of the French government will come during the autumn and the winter, when we will probably see an uptick in social unrest. The size of these protests, and the reaction of the French government, will shape the political agenda in France in the coming months.

    Publishing by The Manila Times of this analysis is with the express permission of STRATFOR.

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