The Discursive Double Game of EMU Reform: The Clash of Titans between French White Knight and German Iron Lady”

In the aftermath of the EU’s enlargement towards Central and Eastern Europe, many scholars and observers of European integration were proclaiming that the French-German ‘engine’ of Europe had come to an end, with the ‘new Europe’ requiring new leadership dynamics. However, the experience of the Eurozone debt crisis provided dramatic evidence that no alternative to the Franco-German partnership has yet to emerge in the enlarged EU. In a time of existential crisis, Franco-German initiatives appear to have remained the basic dynamic of integration. However, as the crisis initially unfolded, French and German leaders had very different views regarding how to respond to the Greek issue. While Sarkozy sought to profile himself as something of a ‘White Knight’ riding to the rescue of Greece and weak Eurozone countries, Merkel was pictured as Europe’s new ‘Iron Lady’ outside Germany, imposing hardship on Greece as well as other European countries. A deal was brokered as market contagion threatened other European countries. It involved a lot of give and take on both sides. Basically, Germany eventually ended up committing to financial solidarity towards the PI(I)GS, in spite of its aversion to a so-called ‘Transfer Union’. In exchange, Sarkozy consented to a conversion to the German ordo-liberal economic paradigm, which implied austerity policy for the EU as a whole. Subsequent episodes in the saga of the Eurozone crisis replayed this basic pattern throughout 2010 and 2011, culminating in the adoption of the Treaty on Stability, Coordination and Governance (also known as the ‘fiscal compact’) signed in March 2012. How can we account for this new Franco-German ‘grand bargain’ on the reform of the European Monetary Union (EMU)? More specifically, what made the agreement possible and why did it take the form it did? These are the questions addressed in this paper.