News Fionnan Sheahan

Thursday 28 August 2014

Fionnan Sheahan: Merkollande just doesn't have the same ring to it -- or the same tack

Fionnan Sheahan

Published 22/10/2012 | 05:00

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THEY were the heavy-hitters who had the power to ensure some EU policies never even made it on to the table.

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The tie between German Chancellor Angela Merkel and former French president Nicolas Sarkozy was always evident when the pair met for summits and conferences.

The warmth was put on for the cameras, just to make it clear they were unified in their purpose, although they were extremely different personalities and nobody actually believed they liked each other.

But they were so close politically they regularly held pre-summit meetings to discuss their joint position on the issues coming up.

Up until six months ago, Ms Merkel and Mr Sarkozy determined the hardline EU economic and monetary policy.

And under their leadership, a banking debt deal would never have been promised in the first place.

Then came the decision of the EU summit on June 29 to separate bank debt from sovereign debt.

Changed

Tanaiste Eamon Gilmore described that decision as a "game-changer". But in truth, the game-changer happened the previous month when Mr Sarkozy lost the election and Francois Hollande became the new French president.

Immediately, the dynamic in Europe over how the eurozone currency and the banking crisis was handled changed utterly.

Mr Hollande forged alliances with fellow relatively new EU leaders, Spanish Prime Minister Mariana Rajoy and Italian Prime Minister Mario Monti.

He symbolically travelled by train to his first EU summit with Mr Rajoy, abandoning Mr Sarkozy's habit of pre-summit meetings with the German chancellor.

The impact was immediate as Ms Merkel suffered a shock defeat when the summit on June 29 agreed the new EU bailout fund could be used to directly recapitalise banks, without going through the government.

Along with the breaking of the link between sovereign and state debt, aimed mostly at assisting Spain, Taoiseach Enda Kenny managed to latch on to a clause to examine Ireland's debt sustainability. Spain was on the precipice of a bailout back on June 29 but it hasn't happened yet.

Already set to get €100bn in eurozone loans for its banks, the regional elections yesterday in Galicia and the Basque Country may be the final obstacle to such a request.

The theory across Europe was Mr Rajoy didn't want to formally request a bailout before these elections as he feared a backlash from voters.

Spain has been implementing austerity measures for the past two years but the country's debt position means more actions will be required.

Under external assistance, Spain will be forced to reform its pensions system, which will be opposed by voters.

But it will also help to end uncertainty about what is required to bring stability to Spain and calm the wider eurozone.

Ms Merkel doesn't want any precedents set in Ireland's case that can be replicated in Spain.

Irish Independent

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