Differences put aside as Berlin and Paris seek common ground

Next Step - Banking Union 

By Quentin Peel in Berlin

Sniping between France and Germany has been almost constant in recent months.

In Paris, politicians have accused Berlin of bullying their European partners into excessive austerity at the expense of economic growth. The Germans have retorted, usually off the record, that the pusillanimous French have failed to reform their economy and revive their ailing competitiveness.

But when Wolfgang Schäuble and Pierre Moscovici, the two countries’ finance ministers, met on Tuesday to celebrate the 25th anniversary of the Franco-German economic and financial council, they came to praise the partnership, not to bury it.

“We are not here to expand on our differences,” the Francophile Mr Schäuble told a gathering of students from both countries at Berlin’s Free University. “We are here to seek common solutions.”

He went on to praise his friend, “dear Pierre”. Mr Moscovici responded with warm words for his “good friend Schäuble”.

The German finance minister, normally an advocate of fiscal rectitude, let it be known that he was perfectly happy with the European Commission decision to give the French government more time to reduce its budget deficit.

In turn, Mr Moscovici dropped his suggestion that the move was a triumphant victory for France over the imposition of excessive austerity – which his own Socialist party openly blames on Berlin. Instead, he reeled off all the policies on which France and Germany did agree – including structural reforms to boost competitiveness, and “positive deficit reduction”, as well as tougher financial regulation and a financial transaction tax.

It was such a warm display of togetherness that at least one student in the audience was moved to denounce their hypocrisy.

Outside the auditorium, a handful of demonstrators called for Mr Schäuble to “get out of Greece”, where austerity measures have caused the gravest social strains. As a senior German participant admitted, the subsequent meeting in Mr Schäuble’s vast finance ministry – the massive concrete-and-limestone Nazi-era Air Ministry built by Hermann Göring – was far more about “show than substance”.

Yet the truth is the two finance ministers have a very good working relationship, if not quite so close as that between Mr Schäuble and Christine Lagarde, Mr Moscovici’s predecessor.

“Mr Moscovici says all the right things about reform and debt reduction,” another German official remarked. “If only he could deliver them, all would be well.”

Mr Schäuble did seek to clarify Berlin’s stance on the formation of a European banking union: that a common eurozone deposit insurance scheme, and a common resolution mechanism for banks in distress, would be possible only with full EU treaty change.

He was happy for banking union to go ahead swiftly, he said, but that would mean having “harmonised national arrangements” for both deposit insurance and bank resolution.

Mr Moscovici glossed over any difference on that score, simply calling for swift progress by the EU summit in June on finalising banking union.

The only unhelpful item was that Tuesday’s figures for German industrial orders in March were up 2.2 per cent – and immigration figures for 2012 showed a surge in workers looking for jobs from the rest of the eurozone. The data could scarcely have shown a stronger contrast to France’s stagnation.