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Franco-German engine splutters over Greece

Source: Reuters - Tue 4th May 2010

Weeks of wrangling over a bailout for profligate Greece brutally exposed core divergences between Germany and France, raising serious questions over whether the traditional motor of closer EU integration has run out of gas.

While French President Nicolas Sarkozy swiftly pledged to save Greece from the humiliation of a default, German Chancellor Angela Merkel dragged her feet and only agreed to back a salvage package when the euro zone was threatened by contagion.

Berlin has defended its procrastination, arguing that the delays forced Greece to accept more effective and tougher budget rigour than if Merkel had immediately opened her chequebook.

But France was stunned by her stubbornness and analysts say the crisis has shown that the days when Paris and Berlin could orchestrate EU policy in an harmonious fashion are long gone.

"Franco-German relations are a pale shadow of what they once were" said Dominique Moisi, a founder and senior advisor at the French Institute for International Relations (IFRI).

"The reason is that Germany has become a normal country and is putting its national interest first, which is what France has done for sometime. This is a problem, because no one speaks today with Europe in mind."

Differing national interests across the Rhine could yet tear apart the fabric of the European single currency.

In Germany, abiding by the rules and pursuing budget frugality is vital. In France, the word austerity is banned from the political lexicon and deficits have become a way of life.

So while France had no problem helping Greece, despite the fact it lied about its finances, for Germany it was traumatic.

"They see themselves as the ants who work and we are the crickets who sing" said Richard Yung, a Socialist senator who lived in Germany for 14 years. "They feel they've been swindled ... and to a degree you can understand their reasoning."


Germany's borrowing limits are enshrined by law, the country's unions have accepted wage restraint to maintain a competitive edge and families still put a premium on thrift, refusing to bow to the Western god of mass consumerism.

This budget discipline made Germany the world's biggest exporter between 2003-2008, only losing the top spot to China in 2009, and giving it the largest trade surplus within Europe.

France is the fifth-largest exporter, but has consistently run up massive trade deficits in recent years and has relied heavily on consumer spending to prop up its fragile economy.

Sarkozy has promised to cut France's runaway budget deficit, and is undertaking a reform of the loss-making pensions system to show he is serious about public finances. But tensions between the euro zone's two economic powerhouses are building.

They surfaced briefly in March when French Economy Minister Christine Lagarde urged Berlin to reduce its reliance on exports and boost domestic consumption, saying massive German surpluses threatened the stability of the euro.

Merkel slapped down the suggestion, putting her EU partners on guard not to challenge the German economic model.

Analysts in Brussels say the differing visions over the economy are part of a broader malaise, with the franco-German axis, which once powered the construction of Europe, no longer strong enough to drive the disparate, 27-nation bloc.

"The franco-German tandem has been in bad shape for a long time" said Ulrike Guerot, head of the Berlin office of the European Council on Foreign Relations.

"The problem is that both France and Germany still have that blocking capacity in the European Union, meaning nothing happens without them" she added. "The tandem ... no longer works on the creative ideas side, but on the 'what-we-don't-want' side."


Not all analysts have such a bleak view, arguing that France and Germany combine well in many areas, pointing to cooperation on new regulations for the financial markets and joint efforts on difficult diplomatic dossiers like Iran and Afghanistan.

"They work together well on foreign policy ... and France is getting closer to the Germans over the environment, which is very important" said Brigitte Lestrade, a professor at the Cergy-Pontoise university and an expert on franco-German ties.

"It is true the motor is turning slowly, but perhaps this is because Sarkozy and Merkel are simply too different" she added.

Although they both belong to the centre-right, Sarkozy and Merkel clearly lack the personal chemistry that flowed between some of their predecessors, with the hyperactive French leader a polar opposite of the more reserved German.

Noticeably though, the outspoken Sarkozy has offered up no public criticism of Berlin during the Greek crisis, with French ministers saying in private they understood Merkel's caution, given the fierce public German opposition to any bailout.

But IFRI's Moisi argues that you need more than compatible personalities to re-ignite the dynamism of the early years of EU integration, as the various capitals look increasingly inwards.

"What is happening goes much, much beyond the fact that Sarkozy and Merkel could not be more different" he said.

"I don't see where the good news is going to come from now in Europe. The feeling of being a European is disappearing."

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