For German leaders today – most born after 1950 and many since 1960 – both the EU and the Franco-German relationship have been a part of Germany’s political DNA. For the immediate post-1945 German generations, their determination to set Germany on a new course in a new Europe was founded on a particular equation of Franco-German partnership, with France playing a lead rider role and Germany accepting the role of the horse. During the last two decades the political and economic geometry of Europe has altered in favor of a more dominant position for Germany. While France can continue to strut on the world stage of the UN as one of the five permanent veto-wielding members of the Security Council and aspire to position itself as a power with global reach, Germany has become the dominant player in Europe. With that fact in mind, the results of the French elections during the coming weeks, regardless of who wins the Presidency, will not change that fact.
The current economic crisis has reaffirmed German dominance in the shaping of the policy responses and in almost all key economic and financial policy challenges of the euro zone and the EU overall. During the 20 years since German unification, France, the second largest euro zone economy, has seen Germany increasingly take de facto command of Europe’s economic choices. During the last decade, Germany’s economy has become far stronger than its French counterpart. Nothing speaks more loudly about this reality than the global markets’ pecking order of national economies’ performance and outlooks. In this last year in particular, it has been clear that Berlin is determined to export its “culture of economic stability” to the entire euro area. This intention is not just an analysis of what Europe needs: Chancellor Angela Merkel also has domestic political reasons to stick to this agenda. As several regional elections are proving, she needs to be aware that German public sentiment is fearful of a fragile currency – the euro, now that it has replaced the revered deutschmark – whose declining credibility could threaten the country’s social security savings. This does not just reflect Germany’s past experience of financial collapse after World War I, it is also a conclusion that emerges from analysis of the on-coming challenges contained in the demography of the next 20 years.
A Difference of Opinions
“Economic governance” of Europe is at the heart of an ongoing argument between Paris and Berlin. France wants the euro zone to be the main focus, whereas Germany wants all 27 member states in the EU to be involved in policy decision-making. The difference, from Merkel’s viewpoint, is that Germany needs these “non=euro” EU members to be made to behave responsibly. With Greece as their poster child, Germans are leery of the EU’s southern members. These countries are big recipients of EU subsidies intended to modernize their economies, but they have not translated this largesse into newly disciplined budgetary attitudes to replace their old habits of inflate-and-devalue as a way to maintain their economic momentum. Moreover, German banks have significant exposure in these countries should default actually occur.