Hollande Sees EU in Danger Amid Talks With Merkel to Plot Future

(Bloomberg) -- French President Francois Hollande and German Chancellor Angela Merkel urged fellow European Union leaders to agree on a post-Brexit road map as economists warn that a weak response risks holding back growth and plunging the EU into extended malaise.

“This isn’t one more crisis, this could very well be the crisis threatening its very existence,” Hollande told reporters in Paris on Thursday alongside Merkel on the eve of a post-Brexit summit of EU leaders in Bratislava. “Europe finds itself at a very decisive point in time,” the German leader said.

All EU leaders except Britain’s will meet in the Slovak capital on Friday to focus on a common agenda after the U.K. voted in June to leave the 28-member bloc. As Prime Minister Theresa May’s government struggles to work out how to manage Britain’s departure, the remaining 27 are seeking common approaches on items such as defense, economic growth and border security.

Faced with the loss of Europe’s second-biggest economy, a divisive refugee crisis and the rise of populist parties across the continent, the risk is that the push by Merkel and Hollande to make the EU more relevant to people’s everyday lives bogs down.

Elections in the Netherlands, France and Germany in 2017 could make it difficult to achieve a significant breakthrough that revives confidence in the future of the EU, according to Philippe Gudin, chief European economist at Barclays Bank in Paris.

“We believe that the lack of ambition of the European agenda could feed a decline in confidence by markets and economic agents in the coming months, causing an economic slowdown in the euro area,” Gudin said in a note.

Breakup Risk

Disintegration of the EU was cited as the biggest “tail risk” in a Bank of America Corp. survey of global fund managers released this week, beating a Donald Trump victory in the U.S. election or a renewed currency devaluation by China.

Hollande cited three EU priorities: providing greater security, investing in the future, and giving young people more opportunities to study and work in other EU countries. “We must have a ‘Bratislava plan’ and give ourselves a road map,” he said.

While EU governments agree on the need for stronger controls on the bloc’s external borders, they are divided over details such as the use of EU border guards. France would like more joint military planning and command, an ambition opposed by some countries who fear it would undermine the North Atlantic Treaty Organization.

The Italian government wants certain types of investment excluded from the calculation of government spending when setting deficit limits, an effort viewed with suspicion by Merkel.

Merkel said the Bratislava summit must begin to formulate a “realistic” agenda “that takes up the worries, the hopes and the aspirations” of European citizens. “In the end, it’s action that will convince the citizens,” she said.

Diplomacy Push

European leaders have multiplied their meetings since the UK’s Brexit referendum on June 23. Merkel, Hollande and Italian Prime Minister Matteo Renzi met on an Italian aircraft carrier on Aug. 22, Merkel and Hollande met Sept. 2 in the French Alps, and Hollande held talks with southern European leaders Sept. 9 in Athens.

Yet “there is little shared vision as to the future of the EU,” JPMorgan Chase & Co. economists Malcolm Barr and David Mackie said in a note.

“In the absence of a clear sense of direction and purpose, the EU is likely to behave defensively and seek to maintain the delicate constellation of political bargains that constitutes the status quo,” they said.

To contact the reporters on this story: Gregory Viscusi in Paris at gviscusi@bloomberg.net, Patrick Donahue in Berlin at pdonahue1@bloomberg.net, Helene Fouquet in Paris at hfouquet1@bloomberg.net. To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net, Tony Czuczka, Ben Sills