Euro Crisis Strains Franco-German Alliance

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Eric Feferberg / AFP / Getty Images

French President Nicolas Sarkozy welcomes German Chancellor Angela Merkel at the Elysée Palace in Paris for a Franco-German summit

If the long-running diplomatic soap opera starring German Chancellor Angela Merkel and French President Nicolas Sarkozy required a theme song, an appropriate choice might be Serge Gainsbourg's 1969 ditty "Je T'Aime ... Moi Non Plus" (I Love You ... Neither Do I). The pair are currently engaged in another of their recurring spats — periodic episodes of policy disagreement and personal vexation that typically end in embraces of reconciliation — and the realization there aren't any other partners out there proposing a better match. But their latest row appears to be more serious and potentially damaging, with both leaders clashing on how to manage the euro at a time when Europe's debt crisis threatens the currency's very existence.

This new period of tension was illustrated on Monday, when a long-planned date between the two leaders was abruptly postponed just hours before Sarkozy was to call on Merkel in Berlin. The topic of discussion: economic governance of the euro — an issue on which they disagree deeply. Initially the Elysée said the Germans delayed the meeting due to a scheduling conflict created by marathon negotiations within Germany's ruling coalition to finalize the government's plan to cut $95 billion in public spending by 2014. By Wednesday, however, reports out of Germany were quoting officials denying that Berlin had canceled the summit and saying that it was actually Paris who had begged off. Either way, the decision not to huddle as planned came within a symbolic context, with Germany demonstratively working to slash public spending in reaction to Europe's debt crisis, while French officials contemplate ways to rein in their nation's deficit while furiously insisting there will be no moves toward rigueur, or austerity.

The escalating sparring comes at a terrible time for the European Union, which for decades has looked to the Franco-German partnership to fuel and shape policy construction and crisis management — and counter Britain's traditional Euroskepticism. Indeed, many of the E.U.'s biggest achievements — including founding the euro and managing the Common Agricultural Policy — arose from France and Germany standing hand in hand. But if they've mostly agreed — on issues from opposing the Iraq war to urging the regulation of global financial markets — the clashes between the two countries have often been resounding. Former French President François Mitterrand sought to block reunification in fear that Germany would become too powerful within the E.U., and his successor, Jacques Chirac, looked ready to exchange blows with former German Chancellor Helmut Kohl in 1996 while debating whether national governments should cede some power to the European Central Bank, as the Germans urged. In just three years in office, Sarkozy has repeatedly turned his back on Merkel during serious policy disagreements and reached (temporarily) toward the U.K. as his new BFF.

In these troubled times, those differences are clear in the two nations' diametrically opposed economic philosophies. Germany has worked hard to keep salaries and costs down to help its import-driven economy stay competitive — a strategy that government officials in Paris are now saying penalizes other euro members and undermines recovery of the entire region. Meanwhile, though French debt levels are very high and getting higher, France's leaders have resisted the types of spending cuts that Germany has announced, fearing that such austerity measures would only starve the country's timid growth, delay recovery and spark mass public protest.

These clashes also extend to the countries' ideas on how to handle the euro. France wants an activist and interventionist "political economy" governance of the currency organized by the 16 states that use it. Germany favors the creation and strict enforcement of broader rules of responsible economic management across all 27 E.U. members, leaving any action taken beyond those guidelines to individual governments. The result is that French leaders now view their German peers as skinflint misers unwilling to back the common interests and solidarité behind the euro's founding in the first place. They also decry Berlin's costly hesitation before helping to create the nearly $1 trillion crisis fund to assist debt-ravaged E.U. partners — a triumph the French trumpet as essentially their doing. German officials contest the claim that they resisted Paris' plan — or that the fund was more France's idea than Germany's — but do acknowledge that their voters resent being asked to pony up rescue funds for countries that refuse to follow its example of economic rectitude, only to have the discipline of Europe's largest economy questioned and attacked by capitals like Paris.

True, there are areas of agreement between the two sides. Despite the hackles raised by the postponement of Monday's summit to June 14, Sarkozy and Merkel co-authored a letter to E.U. officials on Wednesday calling for a crackdown on the kind of market speculation being used recently to bet against the bonds of indebted euro nations. And regardless of the serious new strains on the Franco-German partnership (and Sarkozy and Merkel's own fading mutual affection), this kerfuffle will no doubt end the way others have in the past, with both realizing there aren't many options other than patching things up and soldiering on.

"This is a very close, well-oiled bilateral partnership central to both countries' foreign policies since World War II, and despite the real concern created by this new clash, the relationship will endure," says Karel Lannoo, CEO for the Center for European Policy Studies in Brussels. "We've seen signs of breakdown in the alliance before — before and after Sarkozy's election — and the sad reality is that there is no real leadership alternative to the Franco-German alliance driving Europe."

In the end, Lannoo says, hard realities will probably force both countries to adopt whichever approach to defending the euro and restoring growth seems to work best. Especially, he notes, with economic and demographic forecasts indicating that spending and debt concerns will return as major problems again in the future.