Rethinking Europe, Global HotSpots, Richter Scale

Greece: The Franco-German Split Over “Solidarity” in Europe

Why are Europe’s two key economies so deeply divided over this issue?

Credit: Jason Winter - Shutterstock.com

Takeaways


  • The French are the key advocates of the “solidarity pure and simple” camp inside Europe.
  • Any nation has the right to resist global integration or adjust to unwelcome global realities.
  • This is a decisive moment in the intra-European battle of populism versus economic reality.
  • In France, Italy and other countries, there are those that want to stop the clock and get off the train.
  • The implicit expectation is that Germany has the obligation to show “solidarity.”

When the French say “solidarity,” what they effectively mean in the ultimate analysis is a bailout.

And when German officials hear their French counterparts argue that solidarity is needed for Greece, what they are really hearing is French officials establishing a pivotal precedent – solidarity with France.

That sounds logical and indeed normal enough. After all, the Franco–German relationship has been the motor of the entire European integration process.

What German officials are really worried about is that France, at a much higher level of economic development, has been equally as incapable of undertaking the reforms required in order to succeed in the global economy as Greece has.

While the rest of Europe could at least in general afford to bail out Greece – provided that makes sense – it certainly cannot afford to bail out France, the Eurozone’s second-largest economy.

Nobody’s balance sheet is large enough for that, certainly not Germany’s, even with the best will and intentions. A France that may need financial assistance may look very premature at this stage.

After all, the French economy – despite an only glacially moving process on the road to reform – is far from collapsing (unlike Greece’s is right now).

The “solidarity” mantra

Still, it is very much worth considering closely the incidents of French ministers talking about “solidarity.”

Michel Sapin, the French finance minister, has regularly spoken about the need to practice “solidarity” with Greece – independent of the outcome of the referendum. Likewise, Emmanuel Macron, the French economics minister, has just restated the French mantra: “we need to maintain solidarity.”

There cannot be any doubt, at a humanitarian level, that solidarity with the Greek people is required. But that is definitely something very different from keeping Greece in the euro zone. Analysts like to say, “a monetary union with an exit option is a fixed exchange rate regime.”

That may well be so, but chalk it up to the birthing pains of what may have been an overly ambitious project. The issue before European leaders right now is best described as a matter of “rightsizing.”

They will realize soon enough that if they want to have any help to preserve the overall project, then Greece cannot be part of the Eurozone.

The country has been very helpful to the rest of Europe to comprehend the real depth of the challenge. Unless nations are committed to the cause of fiscal balance, broadly defined, the Eurozone project cannot work.

Are the Greeks living in a parallel world?

Greek voters are notorious for wanting to have their cake – and eat it, too. While 60% of them voted against the rescue package proposed by the rest of Europe, an even higher number – 80% and more – want to stay in the euro.

That is ultimately hard to reconcile. Membership in a club does not just come with privileges. It also comes with obligations.

And while the rest of the Eurozone members are committed to the cause and willing to stick to the rules, the Greeks are evidently not. That is why it is fair to say that the Greeks essentially live in a parallel world.

The real stakes of the debate in the weeks ahead is not so much about Greece. It is about the future of the Eurozone. And, make no mistake about it — this is a decisive issue for all Europeans.

In that sense, all the claims often made in the global debate saying all of Europe has been going agog about a single country that represents just 2% of Eurozone GDP, are wide off the mark.

A great learning case

This is precisely where the Franco-German clash enters into the equation.

The French are the key advocates of the “solidarity pure and simple” camp inside Europe.

What they are in effect saying is that neither global markets nor globalization, reality nor whatever, has the right to force a nation to change the ways in which it feels comfortable.

Resisting such global integration – or adjustment to unwelcome global realities – is indeed the sovereign right of any nation. But it is equally undeniable that a price is to be paid for holding such a “sovereign” position.

Where the French – and the Greeks, for that matter – delude themselves is the assumption that any club such as the Eurozone can protect them against facing reality.

As it stands, the Eurozone can help nations, individually and collectively, that share the same macroeconomic principles to strengthen their defenses, for example, in dealing with currency crises.

But what it cannot do is to inoculate them against the need to deal with the underlying causes of adjustment that are part and parcel of living in, and dealing with the global economy.

It is true that there is great nervousness in all Eurozone countries right now about the fallout from the Greek vote, politically and economically.

But what is understood in many, though not all nations, is that this is a decisive moment in the intra-European battle of populism versus economic reality.

In France, and Italy, as well as in Spain and a few other countries, there are those that want to stop the clock and get off the train. In democratic countries, that is their very good right.

But they must be very circumspect in understanding the real case and cause they are arguing for. Clubs like the Eurozone can be flexible and can help member nations, if and when some countries enter into temporary difficulties.

However, if those difficulties are structural in nature – for example, a profound unwillingness in the domestic political economy to embrace reforms – then all bets are off.

Germany’s role

The implicit hope and expectation is that Germany – as Europe’s new “hegemon” – has the obligation to show “solidarity” (read: provide the financing) to make Europe work for those other nations that face presumably temporary difficulties.

Even top thinkers in London wonder why the “rich” Germans should now be allowed to give up their role as paymasters of Europe. “Haven’t they been able to play that role in the past?”

And, they add, what would explain, given that the introduction of the euro benefitted the German economy, that the Germans could not simply pay up?

From there, it is a very short step to introducing some war-related guilt-tripping into the contemporary European financing equation. The assumption of the near limitless size of Germany’s financial muscle speaks volumes.

It is a telltale sign of the profound illusions that dominate the current European debate.

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About Stephan Richter

Stephan Richter, from Berlin, is the publisher and editor-in-chief of The Globalist. [Berlin/Germany]

Responses to “Greece: The Franco-German Split Over “Solidarity” in Europe”

Archived Comments.

  1. On July 6, 2015 at 2:44 pm tini responded with... #

    true, the Greek case triggers a fundamental rethink of the
    Euro and EU and so it should be as neither provides the credible prospect of a
    better life for most ordinary Europeans. Pretty much everybody who receives
    transfers within the EU – that must be large percentage of the population –
    will sympathize with the Greek public and abhor the prospect of competing
    against motivated and hardworking globalized workforces. To be straight – most
    stand no chance of coming close to competing successfully and hence don’t stretch.
    That leaves European leaders in a no-win situation. Their legitimacy ultimately
    depends on delivering better life prospects in a world where technology
    application and globalization make just that ever harder for the broad public.
    Without projecting upside no politician gets elected – so they all lie in their
    promises – most of them knowingly. When the level of welfare cannot be raised
    credibly the only upside that can be created is after a brutal setback.
    Education and harder work are a way out, but only a few can follow this path. The
    poor masses are left with low skill work and a working poor prospect in the
    current Euro and EU. The French may be on the right track in wanting to
    preserve their little welfare paradise. But lacking critical mass they need the
    EU and Germany in particular to think and act alike. Yes, this idea bears the
    danger of a freeriding contest among Europeans on a Titanic of Europe while the
    rest of the world forges ahead in competitiveness.

  2. On July 6, 2015 at 11:19 pm 20eric responded with... #

    No matter how one looks at the problems Greece, Spain, Italy and Portugal are saddled with, they wont go away for one simple reason, they are part and parcel of their make-up. There has always been an attitudinal divide between the central, northern Europeans and their southern counterparts. Everybody in Europe knows that! These countries are great for a holiday, but very tricky to do business with. Well this is the price the northern Europeans have to pay for political correctness, none of those countries should have been admitted to the EU to begin with.

  3. On July 7, 2015 at 9:35 pm Richard responded with... #

    Vive La France!