Analysis: After shunning Hollande, Berlin hedges bets on French vote

BERLIN Fri Mar 23, 2012 9:33am EDT

Francois Hollande, Socialist party candidate for the 2012 French presidential election, speaks to the media from his campaign headquarters in Paris March 22, 2012.REUTERS/Benoit Tessier

Francois Hollande, Socialist party candidate for the 2012 French presidential election, speaks to the media from his campaign headquarters in Paris March 22, 2012.

Credit: Reuters/Benoit Tessier

BERLIN (Reuters) - After publicly throwing her weight behind Nicolas Sarkozy's re-election campaign at the start of the year, Germany's Angela Merkel and her advisers are quietly preparing for the possibility that they may have to do business with his Socialist challenger.

The tone in Berlin has shifted in recent weeks from one of unwavering support for Sarkozy to annoyance with his shift to a more populist campaign and his abrupt reversal on the role Merkel herself will play in his drive for a second term.

The French president's UMP party won her agreement at the start of 2012 to campaign with him in France, only to drop that idea weeks later, prompting an incensed Merkel to complain about Sarkozy's "erratic behavior", aides say.

German Foreign Minister Guido Westerwelle broke the silence in Berlin last week, denouncing Sarkozy's threat to pull France out of the European Union's open-borders Schengen zone.

Despite the irritations, Sarkozy remains Merkel's preferred choice, in part because he has backed Germany's push for tighter fiscal discipline in Europe.

But at the same time, concerns about Sarkozy's front-running rival for the presidency, Francois Hollande, seem to have dissipated.

Now, the talk in Berlin is of a "charm offensive" if Hollande wins to minimize any hard feelings about Merkel's strong public backing for Sarkozy and her refusal to meet the Socialist before the two-round French vote in April and May.

Initial anger over Hollande's vows to renegotiate the euro zone's "fiscal compact" - a new set of rules on budget discipline that Merkel pushed on her partners - has eased somewhat. Now some German officials are dismissing it as nothing more than "campaign talk".

One senior official even suggested that new language on growth-supporting measures could be added to the fiscal compact to appease Hollande if he beats Sarkozy, though others close to Merkel have ruled out any tampering and said post-facto tweaks to accommodate a new leader would set a dangerous precedent.

"We're really not worried about Hollande," the senior official said. "This is an election campaign. He has to come up with something to distinguish himself from Sarkozy."

As for Hollande's insistence on growth-boosting measures to complement the German push for stricter budget discipline, the official said he could envision "principles being agreed with the French" if the Socialist comes out on top.

Merkel's spokesman Steffen Seibert noted that alongside budget discipline, boosting growth and employment in Europe was one of the chancellor's top priorities and an idea she had pushed together with Sarkozy.

Euro zone officials who have met with Hollande and his economic team in recent months have been told that he would not seek a wholesale overhaul of the fiscal pact, but instead be content with a more nuanced set of adjustments.

"There is a long history in Europe of Germany getting what it wants but giving something to France in return," said Daniela Schwarzer, an expert on France at the German Institute for International and Security Affairs, citing the late addition of the word "growth" to the EU's Stability and Growth Pact.

MUTUAL TRUST

Despite glaring differences in personality, the cautious Merkel and impulsive Sarkozy have learned to work well together in over three years of relentless crisis-fighting and high-pressure diplomacy.

Conservatives who were born just half a year apart, the two leaders have led the euro zone's response to its sovereign debt crisis, earning the moniker 'Merkozy'.

Images of them hammering out new rules for the bloc during a walk on the beaches of Deauville in 2010 have become iconic.

That familiarity, borne from dozens of historic summits, is perhaps the main reason Merkel agreed to back Sarkozy's re-election campaign so publicly in the first place.

Hollande is a relative unknown outside of France and represents uncertainty for Berlin at a time when seamless Franco-German cooperation is absolutely crucial for the single currency bloc.

His calls for joint euro bonds to combat the crisis, insistence on a more growth-oriented approach from the European Central Bank, and his refusal to back Sarkozy's push to introduce a debt brake in France all went down poorly in Berlin.

"When the French opposition talks about renegotiating the fiscal compact and questions the debt brake, then it is undermining important Franco-German ideas that have become core European projects," said Michael Link, a German foreign ministry official with special responsibility for coordinating relations between Berlin and Paris.

Merkel's spokesman Seibert said Merkel and Sarkozy had worked extremely closely together, developing a "high degree of mutual trust in a very critical period for Europe."

But he also made clear that Merkel would try to develop the same close rapport with Hollande were he to defeat Sarkozy.

SHUNNING HOLLANDE

Polls give Hollande a high single-digit lead in a head-to-head second-round contest with the president, though the Socialist's advantage has narrowed in recent weeks as Sarkozy has shifted his campaign focus to immigration and security.

Merkel's decision not to meet Hollande before the vote attracted a great deal of attention at the start of the year.

When Sarkozy first ran for the presidency in 2007, Merkel had no problem hosting his then-rival Segolene Royal - Hollande's former partner and the mother of his four children - at the Chancellery in Berlin.

German officials have pointed to the fact that Sarkozy is an incumbent president this time in explaining the different approach.

But one aide said Merkel had only reluctantly agreed to sidestep Hollande after a request from the French president, and after she received assurances from him that she would not be the sole European leader to do so. The hope is that this can be quickly overcome if Hollande is the victor in May.

"Germany and France don't have the option not to have very close ties, whoever is in power," Seibert told Reuters.

(Reporting by Noah Barkin; Editing by John Stonestreet)