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11 May 2017

Macron will face German ambitions

Emmanuel Macron was voted as the new president of France, beating his rival Marine Le Pen by a large margin. European Union officials breathed a sigh of relief and the stock markets hailed his victory.

The news of Macron’s victory relieved the EU from the fear of Marine Le Pen getting elected as president. The National Front’s leader has repeatedly said that she wants France out of the EU establishment, the return to the French Franc currency and very strict border controls. Le Pen is a right-wing politician, who tries to gain the trust of the French citizens, riddled with fear of the recent terrorist attack that have taken place in the country. Her hatred for Muslims and her anti-EU stance united voters against her, despite the complete failure of the old French political parties.

Macron is a politician that advised president Hollande in matters of economy and has served as a minister of economy in Manuel Valls’ government. He is considered a Europhile, repeating the benefits of being a member of such a union, during his public addresses. Macron has suggested that further European integration is needed, the construction of a common EU budget system and a finance minister who will supervise everything. These are notions that could be regarded as rather innovative, in a period that the anti-EU sentiment is growing across the continent.

One would expect that Macron’s worst enemies in turning those ideas into reality would be politicians that want the EU to fail. In times of financial crisis and rising unemployment, it’s not difficult to find leaders that would defend the right of their country to be self-governed. Unfortunately for the new French president, his enemies are not those people.

Two days after being elected president, the German trade surplus figures were published. Germany’s foreign trade balance showed a surplus of €25.4bn, which is the highest ever figure recorded. Inside the EU, Germany exported goods worth €68bn and imported goods worth €61.1bn. One third of the total German exports goes to other Eurozone countries.

Germany’s trade statistics are the best in the EU and among the best in the world. How is Germany managing to have such good results, when the rest of the Eurozone is on the brink of a new financial crisis, or to put it better it didn’t still make it out of the last one? Critics of German economic policies suggest that, since 2011, the country has greatly benefitted from the low level of the single currency. Even if the Euro is not traded 1:1 with the US Dollar, it has come a long way from the level of $1.60 which it was at the beginning of the crisis.

A series of bail-outs of the most hurt Eurozone economies, an ECB that doesn’t act drastically to address problems, and politicians who try to avoid the political cost have contributed to the decrease of Euro’s value. Peter Navarro, a trade advisor for president Trump, has suggested that Germany is using an undervalued euro to exploit the US and its EU partner countries. Some economists such as Nouriel Roubini and Yanis Varoufakis tend to agree with Navarro’s opinion, saying that the Germans replaced the German Mark with the Euro.

The release of data brought the German side in a difficult position. Instead of feeling confident of the good results, Angela Merkel tried to “wash her hands,” by saying that the rise of the German economy is fueled by the quality of German products that are desirable across the globe. Merkel also said that Germany isn’t able to influence the ECB’s policies, even if everyone in the Eurozone knows that the ECB, follows the instructions of Berlin, most of the times.

Martin Schulz, the Social Democratic candidate for Chancellor and Merkel’s rival, embraced his opponent’s approach. “Let me stress this: I regard the criticism of our high trade surplus as wrong. We don’t need to feel ashamed of being successful. Our exports are the result of good work done here in the country,” Schultz said, in front of an audience of business representatives in Berlin.

Schulz has promised that, in case he’s voted for Chancellor, he will give priority for investments. The greater challenge for Merkel and Schulz is to convince the average German citizen that helping failing Eurozone economies will benefit them. At the same time, they have to defend the German surpluses against the European critics.

Emmanuel Macron is one of the most vocal critics of the German policy. During his election campaign, he promised to reform the French economy and bring it in line with the EU’s deficit rules, which is expected to be a challenging task. The French economy is facing a large public debt and liberals say that it needs core reforms. Macron says that if he puts France back on the right track, Germany will have to start spending more money inside the Eurozone, thus restoring balance.

France is regarded by many, as the counterforce to German domination. Macron seems to be the man who could limit the German ambition and make the European Union function as it was supposed to be. It remains to be seen if he will be up to the task.