France Must Reform Before Building a Franco-German Engine

Steven Kramer
Professor of Grand Strategy, National Defense University

Will French President Emmanuel Macron be able to work with German Chancellor Angela Merkel to restore a fracturing European Union to a position of strength? The Cipher Brief’s Kaitlin Lavinder talked with Steven Kramer, a former policy advisor to the U.S. State Department from 1996 to 2002; Kramer said the answer to the question hinges on Macron’s domestic success.

The Cipher Brief: Do you think that this idea of a renewed Franco-German engine is overstated?

Steven Kramer: It depends on how successful Macron will be in making some reforms in France. The most important will be the reform of the labor law. Every attempt to reform that for decades has failed. It’s failed when conservative governments try to do it because they end up getting demonstrations and strikes, and basically they’ve always backed down. In everybody’s minds, there is this fear of things getting out of control. So when the right tries to do it, it doesn’t work. When the left tries to do it – as [former President Francois] Hollande did in a very ineffective way – a large part of its majority refuses to go along, and you end up with a compromise that doesn’t mean very much.

Macron has to do it. His ability to deal with Germany effectively requires that he succeed in this reform. That’s the big question. What he has going for him is that he has won a series of amazing and unexpected victories. First of all, that he won the presidency, that’s sort of unbelievable, this is a party that didn’t exist and then a few months later it has a majority in Parliament. In that sense, he’s operating from a position of strength to deal with the next round, which is the labor unions.

The weakness he has is that there’s not a massive wave of popular enthusiasm behind him because the number of people that voted in the parliamentary elections is extraordinarily low. His party got less than 15 percent of registered voters. The labor movement is going to be asking itself how strong is Macron. Do they want to compromise or do they want to fight him? And of course, there is rivalry between the unions.

Everything depends on his success in reforming the labor code. Everything.

TCB: Can you explain why his relationship with Germany depends on success in that reform, and also, if he doesn’t succeed in the reform, what happens to French-German relations?

Kramer: The feeling that the Germans have had is that the French aren’t really serious, that they’re not willing or able to deal with the problems that are preventing economic growth. And everybody has basically said that it’s the nature of the labor code that makes it impossible to fire workers under almost any conditions. What happens with this rigid system is you have to hold on to workers when the economy goes down, and when the economy gets better, no one wants to hire new workers because they can’t get rid of them later on.

Then what you have is the short-term contracts – precarious six-month contracts – which go to young people. So you end up with a two-tiered labor system between people who have permanent jobs and a lot of other people who can’t get them. These other people are generally young people, women, and, of course, minorities. The unemployment level is much higher among these groups.

Thus, many people believe that the key to France’s economic growth is changing the labor code. I’m not an economist, I can’t tell you for sure, but this issue is also symbolic of whether the French government is capable of dealing with these things. The Germans are willing and anxious to work with France more as an equal, but the French have to prove that they’re serious about economic reform. This is the real test; it’s a test for everybody.

If Macron succeeds, his position in Europe is greatly strengthened, and then he can begin to negotiate with the Germans about where Europe goes. If he doesn’t succeed, his presidency is going to be crippled from the very beginning.

TCB: Does Germany – and France for that matter – view all of Europe’s problems right now as essentially stemming from poor economic performance?

Kramer: I don’t think anyone believes that all Europe’s problems stem from that, but probably their belief is that this is the most important cause, and I think that’s true.

But we’re not only talking about economic problems; we’re talking about deeper things. Like the fact that the old economy is dying and a new economy is rising, and there are winners and losers in that. This dynamic was really apparent in the French election.

The thing is, where do you go from there? Macron at least provides some kind of willingness to try to move ahead. If he succeeds in this symbolic success on labor, it doesn’t mean that he and the Germans will agree on everything – they won’t. The French have to get the Germans to move away from the austerity policies that continue to damage a lot of other countries’ economies, and they have to get the Germans to stop building up these huge surpluses to the detriment of everybody else. But when it comes down to it, it seems like it’s very symbolic. The French have to prove that they’re serious, that they’re for real about dealing with their problems, and then they may get a lot more receptivity from the Germans. Merkel wants to work with the French, and I think that [German Finance Minister Wolfgang] Schäuble, who’s been the most hardline on fiscal and economic things, maybe will be willing to budge.

In a certain sense, there’s a great symbolic drama here. Macron has to succeed; he can’t afford to fail. If he fails, it’ll be the end of his presidency and he’ll have five years where he won’t really be able to govern. He has the example of Hollande right in front of him – a total failure.

TCB: Turning to defense and security, France and Germany have historically played very different roles in defense and security. Assuming that Macron can succeed and the French-German partnership can move forward, are the two countries going to be able to align on security and defense collaboration within the EU?

Kramer: Remember that it’s not quite as simple as France historically playing a larger role as the EU’s military power and Germany focusing only on its role as an economic power. [Former French President Nicolas] Sarkozy went back into NATO and that was a significant change, and that meant that France was not pushing for an alternative security and defense system in the EU.

But what are really important are the comments that Merkel made a week or two ago after [U.S.] President [Donald] Trump basically did not want to make an absolute commitment to NATO’s Article 5 [the collective defense clause]. She said that Europe is going to have to guarantee its own defense. That is just extraordinary. It means a great change in German-European policy.

For 75 years, the United States has guaranteed European security. And that means basically a belief in the automaticity of Article 5. Our allies believed it, and our enemies believed it. If the president basically says we’re not sure about it, then Europe can’t depend on the United States. That means that the Germans are willing to think seriously about European defense. If that begins to happen, you’re talking about a very different kind of Europe than we’ve had in the past.

That also becomes more plausible because the UK is not going to be part of the EU. Now, of course, NATO doesn’t disappear, but the role of the UK is greatly diminished, and the UK has been the strongest advocate of Atlanticism. You cannot have Atlanticism if the United States is not committed to Atlanticism.

So this is a very big thing, and if that happens it’s going to mean rethinking the entire nature of European defense. Is it plausible for Europe to defend itself? What happens to the role of French nuclear forces? What role would Germany play? Would it increase its defense spending? Everything comes into question, and this is at a time when Russia is far more belligerent.

TCB: Is it really important for Germany and France to be leading on this front, or are there other countries on the continent that could step up?

Kramer: It goes back to the fact that for the whole history of European integration, the leaders have been France and Germany. One reason that was the case is that the Brits took decades to go into the EU, and then they were never fully there, and now they’re leaving it.

It’s always been Franco-German, and there’s not really any other country that has the ability to lead. Italy’s too weak. I don’t think Spain could do it. Obviously, these other countries are very important, but France does have the significant military and Germany has the economic and fiscal clout. It makes sense. It’s not as easy for those two countries to lead when you have almost 30 countries in the EU, but if there’s going to be leadership it has to come from those two countries.

The whole thing is tied together. Macron’s domestic policy restores France’s ability to be more or less an equal partner with Germany, that makes it possible to reform the EU, maybe improve the economic situation. It also makes it possible to think seriously about greater European security and defense. That’s the key thing; everything depends on that.