Macron, Merkel and the twilight of the euro

The Eurozone's project is in crisis. The bankruptcy of the euro area is no doubt and cannot be saved by Macron's institutional reforms.

1.     Machiavelli writes in the "Prince" that the two poles of politics are fortune and virtue. Fortune is the manifestation of a set of more or less favorable circumstances. The virtue of political man is in the ability to adopt a behavior that can be combined with the circumstances that are favorable. This clever combination does not always happen. Indeed it is rather rare.

In the case of Emmanuel Macron the circumstances could not have been more favorable. The Socialist government, in which he had been Finance Minister appointed by François Hollande, was in the process of extinction, and  Hollande was the first socialist President of the Fifth Republic unable to resubmit his candidacy for a second term. On the other side, the scene was dominated by the irreducible division between the rightwing candidacy of François Fillon and that of Front National's Marine Le Pen, a foregone conclusion.

"Fortune" was in favor of the youngest candidate of the Fifth Republic for the Élysée Palace. But Machiavelli had warned that the luck alone was not sufficient. "I can judge, he wrote, that luck may be arbitrary to half of our actions, but still she let rule the other half or less to us." (The Prince, Chapter XXV). The other half (or almost half) depends on the virtue of the political man: that particular talent that allows him to exploit the favor of the circumstances. In this perspective, the main and immediate initiative that Macron adopted was centered on the resolute deepening of the Franco-German axis by proposing a set of European institutional reforms.

 Angela Merkel does not say that she agrees, wanting firstly to examine the content, but she does not even say "Nein". It's her political style: do not deflect from the fundamental line, but let the problems decant, without giving up on the cornerstones of German strategy. For Macron the Chancellor’s  stance is enough to optimistically exhibit the opening of new important negotiations with Germany, reviving the primacy of the old couple. The circumstances are once again favorable.

Nevertheless, Fortune is a voluble goddess, as the ancient Romans taught. On September 24, the parliamentary elections shook Germany. Not only Alternative für Deutschland, the extreme rightwing movement, becomes the third party, but also there was, on one side, the historic defeat of the SPD, recording the worst outcome of its post-war history; and, on the other side, the loss of one-fifth of the votes for CDU/CSU, the base of Angela Merkel's government.

Martin Schulz, the unlikely leader of SPD, announces that the party will not anymore be a member of a new governing majority. Merkel has to form a government with the Greens and the Liberals: a relatively complicated task, given that Greens are in favor of euro, while the Liberals are fairly Euro skeptics.

2.     What will happen to the institutional reforms, which are at the core of Macron’s European platform? Summing up, Macron has proposed the institution of a European Finance minister, a European Fund to support national economies, and a European Monetary Fund. Merkel, as we have seen is not in principle against to any of these reforms, wanting rather discuss their meaning, but for the Liberals, there is not much to be discussed. With regard to installation of a European Finance Minister, it is an old proposal that was already elaborated by Weidmann, chairman of the Bundesbank, and by Schäuble, the powerful Finance minister: he could be given a specific mandate, as to control the respect of budgetary rules by the members State, complementing the monetary check of ECB.

As for a European Fund, it could be set up aiming at intervening with regard to extraordinary natural events, such as earthquakes or floods. In the end, the establishment of a European Monetary Fund is particularly welcomed by Germany to the extent that, during financial crises, it can take the place of the IMF strongly linked to the US Treasury, as it was the case when participating in the “Troika” along with the ECB and the European Commission with regard to the Greek crisis. As we can see, the institutional European reforms can fit the German vision given that their task should be, in the end, a more rigid checking of the respect of the rules governing the eurozone.

The revival of the Franco-German couple, which is the center of Macron's policy, is a fine aim, but the conditions are German."If we want things to stay as they are, things will have to change", according to Tancredi's, Prince of Salina's nephew, famous statement, in the "Gattopardo”.

On 26 September, just two days after the German elections, Macron delivers a grandiloquent address to the Sorbonne audience on the future of Europe, confirming his European project. But the outcome of the German elections has dealt a blow to his ambitious proposals that rhetoric cannot mask.

3.     Macron has won the French elections with a successful slogan: not to be “neither right nor left”. The true meaning of this proclamation is that we are faced with a rightwing position. And Macron takes no more than a hundred days of his presidency to qualify himself as a clearly rightwing politician.

The essence of his program is indeed unambiguous. He is going to reduce public spending to comply with European fiscal parameters, at the same time reducing taxes on the wealthy. This is an ordinary attitude among Eurozone’s governments. Yet, Macron takes it further. He issues "ordonnances", executive decrees, aimed to overturn the labor code that the National Assembly cannot amend but just ratify. A political stance that would have been defined just reactionary in the last despised century, but which is now considered a consistent piece of the new reformist social philosophy.

In essence, it is the abolition of bargaining in enterprises employing up to fifty employees. For businesses up to twenty employees, the employer will choose a worker as a representative. In enterprises with twenty to fifty dependents, a representative of workers can be nominated ... but without a mandate, further adding salt to the wound.

In the large and medium-sized businesses, when the trade unions are not represented (as happens for a sizeable number of enterprises) a technical body will assume the responsibility for the negotiations. Finally, dismissals are at the discretion of the employers, when motivated by economic or organizational reasons, - that is to say, always.

CGT, the leftwing labor confederation, has held a general strike on September 12th, but the other two labor confederations, CFDT and Force Ouvrière, did not participate, weakening the workers’ response. On the political side, Jean-Luc Mélenchon at the head of "The France Insoumise",  who got about 20 percent of the vote in the first round of the May elections, promoted in Paris a big demonstration against the reforms that he had labeled a social “coup d’état”. Meanwhile, Macron has lost nearly half the consensus in the four months following the elections: a steep fall that has never occurred in the history of the Fifth Republic.

4,      Angela Merkel has lost 9 percentage points in the elections, much more than expected, but it is quite sure that she will be able to form, by Christmas as promised, a Jamaica coalition with the Greens and Liberals. So it’s not difficult to guess that she will govern for the next four years, keeping the German hegemony of the eurozone, and doing whatever is necessary to keep the German-French axis.

However, the eurozone's engine is in crisis. The euro had been envisaged as the decisive means to strengthen the European Union in the international competitive arena. It hasn’t been the case. Ten years since the start of the emblematic crisis of Lehman Brothers, the United States has come back to growth, while unemployment has fallen from 10 percent at the peak of the crisis to the current 4 percent.

In the eurozone, instead, after years of recession and stagnation, growth continues to languish, while unemployment fluctuates between 10 and 12 percent in France and Italy, and around 20 percent in Spain and Greece. The only countries that show a higher growth rate (around 3-4 percent) are the countries who have remained outside the eurozone, such as Sweden, Poland, Hungary and the Czech Republic, along with Romania and Bulgaria.

Indeed, Eurozone’s bankruptcy does is not doubtful, whether we look at its ambitious as well as intricate origins.At the start, France imposed the single currency on Germany, who was against giving up the Deutsche Mark, historically deemed in Germany as a second national flag. There is in this sense an undeniable testimony of Helmut Kohl. In an interview with a German journalist, published, in The Telegraph, after the passing away of the Chancellor, Kohl said: "In imposing the euro I behaved like a dictator ... If the Germans could choose through a referendum, the single currency it would never have been adopted by Germany ... I knew I could never win a referendum ... This is fairly clear: I would have lost seven to three. "

In the end, France obtained the long-sought single currency, winning the German skepticism - a Pyrrhus victory, indeed. The eurozone crisis is a matter of fact. But that does not mean that his story is close to the end. The ruling classes – finance operators, businessmen, highly qualified professionals, bureaucrats, all people who may benefit from low-interest rates for financial and real estate speculation - are definitely interested in the defense of the euro. The Euro Cathedral has its own strong religion, the faith in the virtues of the market, as free as possible from the interference of the state. The fact that its pillars are seriously damaged does not mean that we are on the eve of its collapse.

But if instead of trying to make predictions of unforeseen events, such as Brexit, that are subject to being overthrown, we deal with the facts as they are, we can see that the euro is in a state of precariousness, uncertainty, loss of popular consent - and this also has some value in a normal democracy.

5.     The euro crisis is also the crisis of the governments that shield it. In the last May elections in France, the number of the votes cast in the first round, for the National Front, "La France insoumise" and some minor parties, in various ways opposed to the euro, slightly exceeded half of the votes cast. The majority voting system gave Macron a sufficient parliamentary majority, but on September, little more than a hundred days after his presidential victory, the popular consensus was almost halved to around 35 percent, according to opinion polls.

Spain is led by the Rajoy minority government, backed by the Socialist Party which is paying a high price for its choice, trough internal division and the missing of the popular consensus, while Podemos could overtake him at the next electoral round.

Italy is approaching the next spring election with only one certainty: the inability to form a government supported by a stable majority. The future is open to the unknowns. A referendum on the euro is not allowed by the Constitution, but it is significant that the periodical Eurostat opinion polls show fluctuating results, around 50 percent on a euro exit choice. One can remember how the support for the euro, in its nascent phase, was between 80 and 90 percent of the popular consensus.

Whatever the point - the economic and social profile or the popular consensus - the great single currency adventure turned out to be bankrupt. The most serious aspect is that the euro virus has contaminated the large European Union building, risking overwhelming it.

Bidding on the future of the euro and the EU is subject to many unknowns as has been the case with Brexit. But hiding the reality of the facts risks being an exercise not only futile but harmful. Notwithstanding the formal obstacles, one cannot rule out the possibility that, in one or more eurozone countries, a democratically elected government- may open up a breach in the eurozone. And this is part of the unexpected events, which can be discussed only after they have occurred.

What the opposition parties and movements, or the non-fundamentalist currents within them,  cannot allow,  is the refusal to openly argue reality as it is, and not how it was imagined should have been. To declare that the king is naked is the way to save the European Union before it falls victim to the euro crisis. This does not mean the abolition of the euro. Germany can keep euro, as an acceptable alternative to the old Mark, being surrounded by a quite number of satellites that share it. (There are already countries that use the euro without being part of the eurozone).

Other countries may aim to restore strength and prestige to the European Union, coming back to adopting a principle of economic solidarity, as has long been the case in the past, through monetary agreements that regulated currency fluctuations within established margins - the deal that accompanied the growth and stability of European Union, before the changeover to the euro. Giving new life to the European Union, strengthening its principles of democracy and solidarity should be the new task of true European advocates.

Antonio Lettieri

Editor of Insight and President of CISS - Center for International Social Studies (Roma). He was National Secretary of CGIL; Member of ILO Governing Body,and Advisor of Labor Minister for European Affairs.(

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