Kiss and Make Up

German Chancellor Angela Merkel and French President Nicolas Sarkozy said Monday, March 3, they reached a "compromise" on Sarkozy's proposal for a Mediterranean Union, about which Berlin had expressed misgivings. France had envisaged a grouping of Mediterranean rim states, including its former North African colonies, drawing on EU funds while sidelining non-Mediterranean EU countries such as Germany.

"You will see that we have found a compromise on this Mediterranean Union, which will not exclude anyone," Sarkozy said at a joint press conference with Merkel.

"We are in agreement about the Mediterranean Union," Merkel said, adding the Mediterranean Union would be a project involving all EU member states, and both leaders said they would present details to partners at a coming EU summit.

In addition, the German chancellor said the two countries could reach a deal on EU plans to cut carbon emissions from cars. Speaking to reporters after talks on the margin the CeBIT IT trade fair, Merkel said "a deal is envisaged with France on the European targets to reduce carbon dioxide from cars."

She added that a top level working group would be set up on the subject.

The compromises signal a marked changed from alleged tensions between the two leaders in recent weeks, aggravated by Paris cancelling two high-profile meetings with Berlin in recent weeks.

Agreeing to disagree

At the same time, French President Sarkozy said France and Germany should sometimes agree to differ.

"In order for our partnerships to succeed, it is necessary for each to understand and accept our differences in economic culture," Sarkozy said at the opening ceremony of the technology trade fair.

France has been appointed this year's "partner nation" of the annual electronics fair.

Merkel and Sarkozy have had an awkward relationship since the French president took power last year, clashing over issues including central bank independence, industrial policy and French plans for a Mediterranean Union.

"Germany is our first partner, and it's maybe in the economic sphere, where the entente between France and Germany --
which is so indispensable to our two countries and to Europe --
is the least easy," Sarkozy said. He added Germany and France had different ideas about the role of the state because of differing national cultures.

Merkel said good relations between Berlin and Paris were important for the entire European Union.

"If Germany and France are not in agreement, it will be hard to find unity in Europe," Merkel said in her speech.

"Still friends"

At the same time, Sarkozy said good Franco-German ties remained vital.

"(It) has never been more essential for France and Germany to get on, to understand each other, work together. France has great admiration for Germany," Sarkozy said. "I hope you have understood that for me coming here to the CeBIT in Hanover was not just out of politeness. It was an engagement of the heart, an engagement of reason to say to Angela Merkel and to say to you, my dear German friends, that we can work still with you as friends."

Masking the problem?

Some observers have suggested, however, that the two leaders have very little to say to each another given France's cancellation of two high-profile meetings with the Germans in the past two weeks.

Paris and Berlin were supposed to hold their regular summit talks on the same date, but the French President pushed back the meeting to June 9. Both sides cited scheduling problems, even though the event had been planned far in advance.

Subsequently, another high-level meeting between French Finance Minister Christiane Lagarde and her German counterpart Peer Steinbrueck, scheduled for Feb. 26, was called off.

Though the French president's office denied that the decisions had anything to do with disagreements over his plans for a Mediterranean Union -- which Berlin sees as a potential factor of division in the EU -- the cancellations fuelled talk of a diplomatic spat with observes detecting a string of signs that the two leaders' relationship has turned frosty.

A new union

Sarkozy's plan to set up a Mediterranean Union, an organization for southern European Union states to consult with non-EU neighbours -- including Turkey, Israel and Syria -- has annoyed Berlin, which objects to a forum where it will be on the outer.

Merkel says she supports closer relations in the region but opposes setting up a new organization to manage them.

Berlin's warnings against "parallel structures" have been rejected by Sarkozy aides, who say there has been a Council of the Baltic Sea States since 1992 on the EU's northern flank. But the Germans say this is not a valid argument, since most of the nations on that sea are now EU members.

The push assumes greater significance with France taking over this July 1 the EU rotating presidency. Sarkozy is expected to announce the Mediterranean Union on July 13 as the key project of his EU presidency.

Other issues

The two countries are also at odds over the role played by the European Central Bank -- the regulator of Europe's single currency whose main task is to maintain the euro's purchasing power and thus price stability in the euro zone.

Merkel defends as "essential" the bank's independence, while Sarkozy has repeatedly criticized the bank's monetary policies because they were because damaging French exports.

Another point of contention between Paris and Berlin remains the question of France's deficit. The 13 EU members of the euro zone agreed last year to balance their account books by 2010. Though Sarkozy voiced his commitment towards that goal in Brussels, he also stressed it could only be achieved if France's economic growth was higher than it has been so far.

In other words, he gave himself the go-ahead to violate the EU's budgetary rules that lay down that the budget deficits of member states should not exceed 3 percent of GDP.