At the beginning of France’s election season, German Chancellor Angela Merkel took the unprecedented step of crossing country lines to campaign for Nicolas Sarkozy, and showed little desire for a relationship with Socialist challenger François Hollande. But with Hollande now leading in the polls ahead of this weekend’s election, Merkel is changing her tune: In the event of a Hollande victory, she has called for a meeting within one day of the inauguration to discuss a strategy for tackling Europe’s ongoing fiscal woes.Despite their ideological differences, Merkel will get her meeting, and some sort of joint approach will likely be fudged up. Neither France nor Germany wants a crisis, and both sides will be committed to finding a solution regardless of any personal distaste for each other they may have.As the FT reports, this will not come without a cost to Merkel, who has insisted that the current fiscal pact not be renegotiated and remains committed to a strict policy of austerity for Europe. Hollande, for his part, has promised growth measures and a renegotiated fiscal pact. If the meeting does take place, he will get some of what he wants, and some growth plans will be found to garnish Europe’s austerity campaign. (Adding to the European Investment Bank would be one likely move.)It’s still hard to predict how all this would play out. If all Hollande wants is to make it look like he has added a growth (read: spending) dimension to EU policy, then agreement with Merkel will be easy — and may actually strengthen the European consensus. Plenty of leaders are chafing at the German-imposed austerity plans; a nice soothing spoonful of sugar could help the medicine go down.If Hollande wants a real change in direction, however, things could go much less smoothly, and markets are likely to become hysterical if there are signs that France and Germany are unable to agree. Worst case, France itself could become engulfed in the firestorm as investors flee French debt.Sarkozy is gaining in the polls and conceivably could pull out a win, but all over the Continent, European leaders are preparing for change. How much change we will get remains to be seen, but unless Hollande is clever and cautious, the early weeks of his presidency could be tumultuous ones.
Europe Prepares for Leadership Change
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