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International Herald Tribune 15-01-2011The odd coupleat Europe s helmAt the heart of Europe, a troubled political unionPARIS

Sarkozy and M erkei giveimpression of friendship,but it's hardly the caseBY STEVEN ERLANGERShe makes fun, in private, of the way hwalks and talks, of his rapid, jerky ges-tures and facial grimaces.He mocks herdeliberation, her reluctance, her mat-ronly caution.She has compared him to Mr.Bean andto the French comic Louisde Funs, withEurope's key relationshipFrom The New York Times Magazinehis curly hair and large nose. He some-times calls her "L a Boche," the offensiveFrench version of "Kraut," and goes outof his way to give her an embrace and adouble-cheeked kiss in the French fash-ion, the kind of contact that h knowsvery well, aides say, she cannot stand.While the agonies of the EuropeanUnion sovereign defaults, deficitsand bubbles unfold like a great wonkdrama, at their core is something moreintimate: the fractured tale of AngelaMerkei and Nicolas Sarkozy. They h avebeen photographed across Europe giv-ing the appearance of happy partner-ship. They are the best hope Eu rope hasfor continued unity. But they do not likeeachotheratall.As with any couple in trouble, eco-nomie difficulty has added to the strain.Two years ago, at the beginning of thecrisis, Mr. Sarkozy burst out in public,saying, "France is acting, while Ger-many is only thinking about it!"

Later, before an E.U. m eeting in Brus-sels on the Greek bailout, the Frenchpresident w as in a rage at his inability topersuade Mrs. Merkei to do more forthat country.After yelling at the E.U. president,Herman Van Rompuy, h threatened toboycott the meeting, muttering, accord-ing to French officials, "The Germanshaven't changed." Later, when Mr.Sarkozy took camera crews in with himto a meeting, M rs. Merkei insisted theyleave and, aides said, told Mr. Sarkozy,"I w on't let you do this to me."So it is not an easy relationship. Butthey know that they need to keep goingfor the sake of the kids that is, for thesake of Europe.They have instructed their top foreign-policy advisers, Jean-David Levitte andChristoph Heusgen, both consummatediplomats, to m ake the relationship func-tion. Some of the symbolism is a stretch

joint cabinet meetings, ceremonies atthe Are de Triomphe and the Berlin Wall.But there is an extraordinarily closecoordination between the two staffs, andbefore every major E.U. summit meeting,Mr. Sarkozy and Mrs. M erkei hash out ajoint position to take to the other 25 mem-ber states. This isn't very democratie; itprobably isn't very pleasant,either.Yet ifthe Union is to function, Mr. SarkozyandMrs. Merkei have to get along.The Sarkozy-Merkel relationship mat-ters because the challnges they andEurope face areboth enormous and corn-plicated, combining dismal economics,national pride and anxious electorates.They need to wo rk out whether statesthat share a currency can still haveindependent fiscal policies or, put dif-ferently, whether a currency union is vi-able without economie and even politic-al union, and if it isn't,whether it shouldbepreserved.Behind this seemingly technocratiechallenge, of course, are profound ques-tions of democracy and citizenship, ofnational identity and self-determinationand o f the right way to handle Europe'smany ghosts.Consider the meeting of Mr. Sarkozyand M rs. Merkei that took place last Oc-tober at the French seaside resort ofDeauville. As they walked on the beach,they considered how to stabilize theEuropean economy.The European Financial StabilizationFacility had kept Greece and Irelandfrom collapse, but it was ad hoc. Mr.Sarkozy wanted to extend it withouttouching the Union's basic treaty.Mrs. Merkei said that, constitution-ally, she could not commit Germany tosuch an indefinite responsibility with-out a treaty change. She also did notwant private investors to think thattheir national-bond investments wereguaranteed a bailout if thingswent bad;she wanted private bondholders to facethe prospect of a "haircut," as thephrase goes, in the event of default.Mrs. Merkei committed herself to apermanent financial backstop, onewhose stability would be based on thestability and solvency of Germany itself.Mr. Sarkozy agreed that with the newmechanism, beginning in 2013, in-vestors would take some of the losses onbonds in insolvent euro-zone nations.That implied that some countriescould actually default, and gave a strongsignal to investors not to put moneyafter 2013 in the bonds of countries likeGreece, Spain or Portugal. Thedecisioninfuriated the European Central Bankchief, Jean-Claude Trichet, who pre-dicted, accurately, that it would shakethe markets and endanger Ireland.But there was little Mr. Trichet or the

plan's many other opponents could do.Mrs. Merkei is determined to make fis-cal discipline the price of German credit.While she did agree to drop her pro-posal for automatic penalties for coun-tries that brok e fiscal rules, she refusedto consider suggestions for a genera!"Eurobond" backed by all members.Many European countries like theidea of a Eurobond, because it mightprevent private markets from tradingon the differences between nationaleconom ies and policies.But it would do so, ultimately, becauseof the strength of the German economyand its government's own legendaryprudence (and it would raise Ger-many's ow n borrwing costs).That wasnot an obligation Germans wanted totake on. So Mr s. Merkei said no.As Ulrike Gurot, a G erman analystonce married to a Frenchman, puts it,Germans "sublimated hegemony. Butwe're dropping the sublimation now."She laughed, then added, "O f course,thisdoesn't sound nice toothers."A senior German official, however,says Mr. Sarkozy's ambition to lead andhis taste for big ideas like his plans forthe Group of 20 this year to re-examinethe role of the dollar and the regulationo f food markets are attractive andhelp Mrs. M erkei."She brings him down from 120 per-cent to 75 percent, and then they try todo half o f that,'' h told me.Mr. Sarkozy also sees an importantrole for himself in tethering Germany tothe Union, helping M rs. Merkei to resistdemands at home that Germany stop fi-nancing anyone else.Anne-Marie Le Gloannec, a Germanspecialist at the Institut d'tudes Poli-tiques in Paris, says: "Sarkozy is catch-ing Merkei from floating Germany toofar away, compromising to try to pullhe r back into the European framework.But she needs this, too."DIVERGENT PERSONALITIESBorn only six months apart, the twocould not be more different in terms ofpersonality and world view.Mrs. Merkei, 56 , grew up in a leftisthome in the farthest northeastern cornero f Communist East Germany, in the Prot-estant flatlands where the Russian windwhistles. She learned to speak Russianand Czech. She is a physicist; her secondhusband is a chemist, a professor whokeeps to himself; she has no children.After the unification of Germany, shewas an apprentice to former ChancellorHelmut Kohl,his' underestimated maid-en'' from the East, and shemoved to Ber-lin itself considered un-German, in away, conquered territory on what isthought of as the barbarian steppe, far

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I n t e r n a t i o n a l Herald Tribune 15-01-2011from the rich sou of German culture.It was from Mr. Kohl that she learnedthe importance of pandering to Frenchvanities about being the true beatingheart of the European ideal. An d thenwhen Mr. Kohl got into trouble, his East-ern malden became Germany's first fe-male chancellor.That is when she had to face Mr.Sarkozy.' She'sa scientist, almost like aGerman clich, planning everything,going step by step, unemotional, not ashow horse," said Stefan Kornelius, asenior editor of the daily SddeutscheZeitung. "But Sarkozy's the kind ofmacho man that she doesn't like at all.And she and the chancellery are irrit-ated by his jumping from issue to issue,his lack of attention, his inability to doGerman systematic work. She's a tech-nocrat with a bidden husband, and he'sflamboyant, with a beautiful woman'' the singer and former model CarlaBruni-Sarkozy "at his side."Mr. Sarkozy has been much criticizedfor his love of money and gaudiness. Awealthy lawyer with wealthy friends, hlives a gilded French presidential life,surrounded by staff members alwaysready with a glass of freshly squeezedorangejuice.Mrs. Merkei still lives in the centralBerlin apartment she occupied beforeher election and can sometimes be seenout shopping, or stopping into a favoriteFrench-style restaurant, Borchardt, fora quick meal with her husband.Mrs. Merkei has surrounded herselfwith strong women and technocratiemen, and she manages m en very well, asenior German official told me: "Shetakes them by their biggest weakness,which is ego, and caters to it to a point,and then coldbloodedly, like an aikidofighter, uses that energy and pulls it inher direction. She doesn't function interms of male mechanics, all ego andpumping up yourself and shouting;these male tools fail with her, and sheuses these to her advantage. Andthosewho team up with her, she Iets take a lotof the credit."It sounds similar to how she handlesthe French president. Unlike Mr.Sarkozy, f amous for absorbing a compli-cated brief as h walks to a meeting,Mrs. Merkei is an assiduous worker andnormally the best-prepared person inthe room.

Mr. Sarkozy rules France like a king;Mrs. Merkei is a coalition politician w howants to bring others along. The Ger-mans like to teil a joke about Mr.Sarkozy piloting a plane and informingthe passengers h has good news andbad news: "The good news is that we'reahead of schedule. The bad news is thatwe're lost."There was a time when the trans-At-lantic tie enabled Europeans to find di-rection in the world as part of a U.S.-led,U.S.-protected liberal West. That mo-ment seems to have passed, leavingEurope to find its own way.Th e United States never did takemore than a mild interest in Europeanunification. In a meeting with Europeanjournalists in 2005, President George W .Bush said airily that h appreciated"how hard it was to get a federalist sys-tem in place that was balanced and

fair," adding that "every time I meetwith the European leaders, I ask themhow it's going."President Barack Obama's approachhas not been much different, particu-larly as the Europeans have made itclear they arenot eager to help solve theAfghanistan problem. In general, theObama attitude has been: Europe,lovely place; European Union, lovelyidea, but wish it would do more on de-fense; euro, well, good luck with that.D I F F E R I N G N O T I O N S O F E U R O P EFrance and Germany, with their sharedbloody past, are unlikely allies, andtheyhave radically different notions of howEurope should work. France wants astate-dominated, centralized, bureau-cratie Europe in its own image. Francealso maintains a Mediterranean atti-tude toward budget deficits, having lastbalanced a budget 35 years ago.Germany, a federal state with power-ful regions, coalition governments andan influential constitutional court,wants a Europe of laws, discipline andfiscal probity, with a strong currencyand real penalties for the spendthrift.Long the financier of the Union, Ger-many has made it clear that it will nolonger pay for the mistakes and fraudsof others.While Germany has always acted inits own interests, the Kohl generationinterpreted those interests as being em-bedded in institutions like NATO andthe European Union, which protectedthe new democratie Germany and keptits ambitions in check.Bu t Germany, reunited, sees NATO asless necessary, even hollow. It needs theUnion less. And it is turning more to-ward the East the old Soviet bloc andRussia for energy and markets.

If centralized France has traditionallysupported E.U. institutions and currentlyadvocates a form of "European econom-ie governance," federal Germany hasbe-come much less willing to subordinatenational interests to European ones andhas been a strong defender of nationalsovereignty,especially over budgets.In a recent speech in Bruges, Belgium,Mrs. Merkei spoke of the need to moveaway from "the community method,"led by the European Commission, towhat she called "the union method," inwhich the nation-states effectively takethe lead in cooperating with the commis-sion and other E.U. institutions. "The'community m ethod' can only be appliedin those areas in which the EuropeanUnion actually has competence," shesaid tersely, adding, "Where the com-munity has no competence, the 'commu-nitymethod' clearly cannot beapplied."In other words, the Union should doonly what it is authorized to do and cando well. Otherwise power should remainwith the states.If Germany speaks for Europe'slargely industrial Protestant north,France has always combined north andagricultural south.

"Sarkozy is being the spokesman forthe south, but h also understands thatGermany has the clout," says Ms. LeGloannec, of Institut d'tudes Politiques."So you have to say yes to some of whatthey want, but at the same time Germany

can't talk to all Europeans or take a pub-lic leadership role. In a way, the Germansreally don't know how to talk to others.She and h may be like Laurel and Hardy different but complementary."As the euro crisis grinds on and theGerman economy continues to outpacethe others, Mr. Sarkozy is paying moreattention to the German model and giv-ing in more to German demands.He is extremely anxious, aides say,that France is losing its prominence inthe new Europe, slipping behind Ger-many to second-class status. Inside theFrench cabinet, Germany's economiemodel, labor relations and capacity fortechnical innovation are prominent top-ics, with German standards and thefear of losing Paris's AAA bond rating driving French reforms and budget cuts.The clich used to be that nothinghappened in the European Union withoutFrench and German agreement. TodayFrance and Germany are regarded asnecessary but no longer sufficient.Mr. Sarkozy fears, with some justific-ation in a bigger Union of 27 nations anda euro zone of 17, that French agreementmay soon not be needed at all. The newE.U. members to the east are more Ger-man in their aspirations than French.Th e Czechs and Slovaks, as well as theBalts, are all fiscally conservative. EvenPoland, which has such an em otional tieto France, sees its economie future withGermany.GERMAN RESENTMENTS SIMMERThe fundamental problem is that Ger-mans are worried that their manifoldsacrifices for national prosperity will bedumped down the drain of Europe'spoorest and most profligate. T herefore,despite Germany's economie success almost a second economie miracle, afterthe expensive absorption of East Ger-many Mrs. Merkei has serious polit-ical challenges. "The Germans have discovered thatthey are the only serious global economyin Europe, capable of competing with theUnited States and China," says JohnKornblum, a former U.S. ambassador toGermany. "But they're afraid their worldis coming apart around them, and whatthey thought would support them, theEuropean Union, is dragging them down.They realized that the stability pact isn'tworking, that the Greeks were lying andmaybe others, too, that their banks andFrench banks were deep in the muck, andthey understood this is going to cost a loto f money. So they are behaving in a verydemanding way, which smells to somelike nationalism. But it really is fear."So while Mrs. Merkei says she isdeeply committed to the Union and theeuro, she must, as a politician, managethe angst.A strong minority of Germans fee! shehas already gone too far down the roadof balling out Europe's "Club M ed."State elections in 2011 could furtherhamper her ability to make bold de -cisions to protect European unity. Andshe must always be mindful of the Ger-man constitutional court, which plays avery strong role in interpreting treatieslike those that bind Germany to the U n-ion.Mr. Sarkozy's politica! problems are

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I n t e r n a t i o n a l Herald Tribune 15-01-2011also legion and likely to worsen as aus-terity programs bite. To win re-electionin 2012, Mr. Sarkozy needs first to re-unite the right behind him, in the face ofa vibrant challenge from the far-rightNational Front and divisions within hisow n center-right party.His main opposition, the SocialistParty, is divided, and both France andGermany are waiting to see whetherDominique Strauss-Kahn, the man-aging directer of the International Mon-etary Fund, will run for the Socialistnomination.It was Mr. Sarkozy who pushed Mr.Strauss-Kahn to take the I.M.F. job, fig-uring h was getting a rival out of theway. But the euro crisis has made Mr.Strauss-Kahn, 61, even more important,giving him the international reputationand gravitas to challenge Mr. Sarkozyand even win.While Mr. Sarkozy tried to keep theI.M.F. and Mr. Strauss-Kahn at a ds-tance the I.M.F. is basedin Washing-ton Mrs.Merkei insisted that only the

I.M.F. had the experience to make theGreek salvage operation credible.Mr. Strauss-Kahn has been crucial tothe Irish bailout as well an d will have astrong part in any future defense of theeuro. He is a German speaker and hasbeen a key negotiator with Mrs. Merkei.With a German almost sure to takeover leadershipof the European CentralBank in November, and another Ger-man set to take over the secretariat ofthe European Union's Council of Minis-ters, there should be even more supportfor Mrs. Merkel's vision.With Germany ascendant and lookingboth inward and eastward, Britain stay-ing out of the euro zone and France car-rying less weight, the question of Ger-man leadership is now at the fore.Germany has traditionally avoidedtrying to lead Europe from the front;memories from World War II, thoughfaded, have not yet gone away in therest of the Continent. Even now, anti-German feeling is rising among Greeks,Portuguese and Spaniards, who feel

abandoned, even betrayed, by Berlin.Still, Mrs. Merkei is going to have toexercise more leadership if the euro isgoing to be saved, even if she still hidesto some degree behind France. And ac-tive German leadership of the Unionmeans a clearer understanding that po-litically difficult compromises are goingto have to be made and that money willhave to be spent and promised all inthe face of growing German discontent.Mr. Kornblum, still resident in Berlin,sees a model for Germany in the UnitedStates and the way it helped keepEurope together after the war, mediat-ing disputes and finding compromises."The Germans don't see it yet," hsays. "But they will have to take on therole of the United States in Europe, andhave the same kind of balancing role wehad for such a long time." At that point,Germany's marriage with France won'tmatter so much anymore.

"She's atechnocrat with ahidden husband, and he'sflamboyant, with abeautifulwoman at his side."

M r. Sarkozy is anxious, aidessay, that France is losing itsprominence in Europa,slipping behind Germany tosecond-classstatus.