German Chancellor Angela Merkel holds flowers she received for her 59th birthday before the weekly Cabinet meeting in Berlin on Wednesday. Photo: Tobias Schwarz/ReutersGerman Chancellor Angela Merkel holds flowers she received for her 59th birthday before the weekly Cabinet meeting in Berlin on Wednesday. Photo: Tobias Schwarz/Reuters

With quiet satisfaction, France’s Socialist Government has watched Angela Merkel strike a softer stance on Europe in recent months as she prepares for Germany’s election.

What’s more, Paris believes the poll might just nudge the conservative Chancellor yet further from the hardline fiscal austerity policies she has embodied for much of the eurozone’s debt crisis.

With two months to go before the September 22 election, François Hollande’s Government rates Merkel’s chances of securing a third term at “85, even 90 per cent”, a senior aide said. More strikingly, it is comfortable with that outcome.

Just a year ago, Merkel contemplated letting debt-stressed Greece be jettisoned from the eurozone, while the newly-elected Hollande pondered leading a revolt of southern states to counter a feared German hegemony over Europe. Both stepped back from confrontation.

Hollande saw it was bad for French debt yields for France to be aligned with troubled states such as Greece or Italy; and Merkel feared her rising unpopularity outside Germany was a political liability, and was spooked by the huge potential cost to Berlin if a Greek exit led to a eurozone break-up.

In the 50th anniversary year of the World War II foes’ 1963 friendship pact, Berlin and Paris struck a ‘Realpolitik’ truce. France got more breathing space to get its public finances in shape but has dropped talk of euro debt mutualisation and other projects that are anathema to Berlin. Hot potatoes such as completing the EU’s banking union must also wait till next year.

Some in Hollande’s Socialist Party continue to rail against Merkel’s “self-centred intransigence” and to depict German policies as the main obstacle to reviving the European economy.

Yet Hollande – who during his 2012 presidential campaign was denied a reception in Berlin by Merkel – has refused to give explicit backing either to the incumbent or to Peer Steinbrueck, rival candidate of the German Social Democrats.

He did attend the Social Democrats’ 150th anniversary bash in Leipzig, but then so did Merkel.

When Merkel hosted a Berlin summit this month to show she wants to tackle the scourge of youth unemployment in Europe, Hollande was happy to be at her side – despite concerns in his party that the whole thing was a German election stunt.

“She is doing this with two things in mind,” a French diplomatic source acknowledged at the July 3 meeting, which critics derided as a “show summit” with little substance.

“First, to prepare the election – and no one can blame her for that. Second, there is the European angle: to show Germany cares about youth unemployment and is open to new ideas.”

Wishful thinking? Much will depend on the exact vote count and weeks of coalition negotiations that will ensue in Berlin in the likely event that no party secures an outright majority.

Merkel is riding high in the polls with around 40 per cent support – not enough for her Christian Demo­crats to rule alone.

In the quest to broaden her appeal past her conservative grass roots, Merkel’s manifesto includes nods to policies such as a minimum wage, which Hollande’s Socialists have long argued Germany should embrace to match similar provisions in France.

Merkel is riding high in the polls with around 40 per cent support – not enough for her Christian Democrats to rule alone

“It has been a bit of a divine surprise in Paris that, in mid-campaign, instead of turning into an even tougher cookie, Angela Merkel has become a sweeter proposition,” noted Thomas Klau of the European Council on Foreign Relations.

If Merkel does not win an outright majority and the FDP are not available as partners, the next choice as coalition partner would likely be the Social Democrats (SPD), currently struggling at around 25 per cent of the vote.

She might also try for a deal with the ecologist Greens, but they look more incompatible with her Christian Democrats.

Badly burnt by a 2005-2009 ‘grand coalition’ with Merkel in which it hemorrhaged voters, the SPD would only enter a similar pact again if it won assurances from Merkel that it would have a clear say on policy and senior representation in government.

“A grand coalition would help change Germany’s view of other countries. And abroad, Angela Merkel wouldn’t be seen as the only winner,” said a senior French source of the scenario.

“I expect François Hollande and Angela Merkel to accelerate the drive towards European integration,” said a senior diplomat in Paris. “They have to set out a convincing vision.”

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