Franco-German engine splutters over Greece

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 eurozone 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 checkbook.

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.

Budget Discipline

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 eurozone'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.

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