Belfast Telegraph

Franco-German blame game spells serious trouble for Ireland and euro's future

By Dan O'Brien

How different would things be in Ireland and Europe today if the euro had never come into being? Given the enormity – politically, economically and financially – of sovereign countries sharing a currency, it is difficult even to speculate on how the world might look if euro countries had kept their pounds, francs, marks, liras and pesetas. But it can be said with a great deal of certainty that a very significant happening, which took place the weekend before last, would not have happened.

That happening was the extraordinary public criticism of Germany by a senior minister in the French government. The Economy Minister, Arnaud Montebourg, said this at a Socialist Party meeting: "France is the eurozone's second-biggest economy, the world's fifth-greatest power, and it does not intend to align itself with the excessive obsessions of Germany's conservatives."

He went on to call for "just and sane resistance" to the austerity policies he accused the German government (which, as it happens, is a left-right coalition of both conservatives and social democrats) of imposing on the rest of Europe.

Regardless of whether he is right or wrong about the policy stance, it is hard to think of a member of a European government openly attacking another in this way.

It is impossible to think of anyone in a party as historically committed to Franco-German rapprochement of doing so.

That Montebourg alluded to the Second World War by talking of "resistance" was even more astonishing – over the past half century overcoming the two countries bloody history of three wars between the 1870s and 1940s has been an imperative for both nations.

The attack illustrates the dire state of Franco-German relations, which have been the most important single relationship between any two European countries in the post second world war era.

That spells serious trouble for Ireland – and all other countries in the eurozone – if Paris and Berlin cannot get along, the single currency and the entire European integration project are in peril.

But here is the great irony of all this – a currency that was designed to bring Europe together and contain the power of the united Germany is doing exactly the opposite.

The unavoidable need to have shared rules in the currency area is leading to a blame game that is poisoning relations among its members.

That has long been obvious in the European periphery, but it has now spread to the Franco-German core. It could be that these recriminations will fade if the European economy picks up of its own accord or if policy changes are implemented that all countries support. But if neither happens, the Franco-German core of the eurozone will weaken further and support in both countries for those advocating abandoning the euro – including the French National Front, which already has the backing of one in four voters – will likely rise further.

An even more fundamental reason to be pessimistic about the future of the euro is the difficulty of finding an agreed way to run the euro project given how differently the two countries view most economic issues.

While there are things that both sides of the political spectrum in the two countries have in common, such as a belief in extensive public provision of health services, education and welfare, there are far more differences than similarities.

While Germans have always seen competition in the marketplace as a means of driving efficiency and prosperity, the French are famously sceptical of the invisible hand of the market and have long instinctively preferred the guiding hand of a strong state.

This has not only manifested in domestic affairs but in international economic relations too.

While France is always among the EU countries most resistant to freeing trade with other countries (including, currently, with the US), Germany has traditionally been in the pro-liberalisation camp.

Their different views on the relative importance of the market and the state in economic life is also reflected in views on macroeconomic management. No French government, as is frequently pointed out, has balanced its books in almost 40 years and proposals to cut public spending almost inevitably lead to street protests.

The Germans, by contrast, have a near obsession with fiscal discipline and an aversion to living beyond their means – Germany is a rarity in that politicians promising cuts can expect plaudits rather than protests.

It is not clear that the political elite across the eurozone have fully internalised the magnitude of the change that came with joining the euro.

It is very clear that the French political elite has not. That, along with a range of other factors, points to a break up of the Eurozone – sooner or later.

Belfast Telegraph