News Analysis: Economy to dominate Hollande, Merkel meeting in Strasbourg

French President Francois Hollande is scheduled to meet German Chancellor Angela Merkel in Strasbourg on Jan. 11.

The informal gathering, at the invitation of European Parliament President Martin Schulz, gives the leaders of the European Union (EU)'s two most powerful countries the opportunity to discuss Europe's continued sluggish economy.

Coming just a few days after the terrorist attacks at the offices of the satirical magazine Charlie Hebdo, security is also bound to be on the agenda. So far, the Elysee Palace has not indicated that the meeting with Merkel will be postponed.

In any case it is economic matters that will dominate proceedings.

Relations between the two country's leaders have been lukewarm over the past couple of years, nothing like the mutual admiration between Merkel and Hollande's predecessor Nicholas Sarkozy.

On winning the French presidency in 2012, Mr. Hollande appointed Jean-Marc Ayrault, a German speaker, as his prime minister in the hope of securing a central role alongside Germany within the EU. It did not work. Mrs. Merkel and many of her government colleagues have spent the past two years barely disguising their frustration at what they see as France's unwillingness to implement the structural reforms they deem necessary to make the French economy more competitive and so help boost growth across the Eurozone.

For their part, many in Mr. Hollande's Socialist Party are equally annoyed at what they see as Germany's insistence on fiscal rectitude over greater public spending, for example, on infrastructure.

In an interview with business newspaper Les Echos published on Jan. 6, French economy minister Emmanuel Macron said Germany should lead a 'genuine' revival of growth in the Eurozone by doing more to boost investment and consumer demand. He added that both countries 'must go further together' to promote economic recovery.

Europe's economy continues to flounder, with persistently low rates of inflation encouraging consumers and businesses to delay purchases or investments in the expectation that prices will continue to fall.

A survey published this week indicated that the fourth quarter of 2014 was the Eurozone economy's worst for more than a year.

Having replaced Mr. Ayrault as Prime Minister with the more reform-minded Manuel Valls, Hollande is hoping for a fresh start with Merkel. But this will not be easy. The failure of the Greek parliament to elect a new president triggered a snap election on Jan. 25. With this comes the prospect of electoral success for Syriza, a far-left populist party led by Alexis Tsipras. That result could plunge the Eurozone into another crisis, piling yet more pressure on the single currency, and the EU itself.

Some of France's leading politicians will use this prospect to badger Merkel into loosening the fiscal straitjacket, arguing that persistent austerity is only fuelling the rise of extremist parties in many countries, not least France where Marine Le Pen's Front National is supported by a substantial minority of voters.

But again the Germans see things differently. In their view, it is the apparent inability of mainstream parties in some countries to enact real reform that has led to the growth of extremism.

Merkel's likely retort to Mr. Hollande is that France can regain its clout in the EU only if it can show it is brave enough to do what is necessary to make its economy more competitive. Endit