France is serial loser in unfolding euro drama

December 13, 2011

By Pierre Briancon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Once again Nicolas Sarkozy has made the world believe he scored a great success at a European summit. But once again, this was thanks to diverting attention away from the substance of the talks to a third-party drama where he played the tough guy. In the latest instance, he used the opportunity provided by the unprecedented diplomatic amateurishness of a UK prime minister. Sarkozy may have fooled pundits and part of French opinion. But the bigger truth is that France has lost to Germany on all the important arguments about how best to fight the euro crisis.

At every turn France has agreed to most German demands. It signed up to a constitutional “debt brake” which will be much more powerful than the so-called “golden rule” that Sarkozy had proposed for French budgets. France has also had to consent to quasi-automatic sanctions against countries that violate the euro zone’s fiscal discipline rules.

But Paris suffered its most severe defeat over the role of the European Central Bank. Again and again, from one summit to the next, Paris came up with schemes to circumvent what Mario Draghi would call “the spirit” of the EU treaty which prohibits central bank financing of national budget deficits. There was the idea of making the European bailout fund a bank. Then the suggestion that the ECB might lend money to the International Monetary Fund. All these ideas came from the obsessively creative French treasury. Predictably, all of them were shot down by Angela Merkel and the ECB.

But at every summit, Sarkozy also managed to turn the situation around and save French blushes. Each time, France teamed up with Germany to play hard ball with a third country. Silvio Berlusconi was dissed; George Papandreou was admonished; and last week David Cameron was bullied. Commentators insist this last summit was a diplomatic victory for France. By that yardstick, one hates to think what a defeat would look like.

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