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French-German axis hinges on reform delivery

Friday, July 14, 2017

Significance

The joint cabinet meeting -- an annual event -- is only one of many signs of the close, long-term alliance between France and Germany. Still, yesterday’s gathering produced more than mere mood music. German Chancellor Angela Merkel even indicated that she would consider a euro-area budget and a greater role for the euro-area rescue fund -- something that would have been unthinkable even a few years ago.

Impacts

  • Brexit and Trump’s and Macron’s victories have given new impetus to the Franco-German axis.
  • This will continue even if Merkel fails to be re-elected.
  • More German investment would make it easier for Macron to sell tough reforms at home and demonstrate goodwill globally.
  • France and Germany will develop Europe’s next-generation fighter plane and cooperate more to fight Islamist terrorists in the Sahel region.
  • They also plan to launch a 1-billion-euro (1.14-billion-dollar) investment fund for technology start-ups, and harmonise corporate taxes.
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