France vs. Germany

German Chancellor Angela Merkel, center left, speaks with French President Francois Hollande, center right, during a meeting
German Chancellor Angela Merkel, center left, speaks with French President Francois Hollande, center right, during a meeting on the sidelines of a eurozone heads of state summit at the EU Council building in Brussels on Tuesday, July 7, 2015. Heads of state in the eurogroup meet in Brussels on Tuesday for a special summit to discuss the financial crisis with Greece. (Olivier Hoslet/Pool Photo via AP)


The Greek crisis has mutated into a Franco-German confrontation over the rules that govern European unity. For France, European integration is a goal to be achieved regardless of the cost. For Germany, although European unity figures prominently on its agenda, the speed and depth of European integration must be analyzed pragmatically, weighing the benefits and the costs. This means that France wants Greece to stay within the Eurozone no matter what, while more Germans than ever think that there is no room in it for a state that lacks the resources, the capabilities, and the political will to be a full member of a monetary union, which requires very specific commitments. Understanding the Franco-German clash requires a little bit of history. In the 1980s, when the European project was running out of steam, France was feeling overwhelmed by a more successful and increasingly powerful Germany. Moreover, monetary instability was causing much economic turmoil, and the Bundesbank reigned supreme, given that other central banks had no choice but to follow its lead when it came to setting interest rates. The Bundesbank's Diktat pleased nobody, especially the French. In 1990, the governor of the Bank of France, Jacques Larosière, argued that "today I am governor of a central bank who has decided, along with his nation, to follow fully the German monetary policy without voting on it. At least, as part of a European central bank, I'll have a vote." France, however, had two assets at its disposal. The first was Michel Camdessus at the helm of the International Monetary Fund, of which he was Managing Director between 1987 and 2000. The second, and far more important asset, was Jacques Delors, President of the European Commission between 1985 and 1994. Both believed in the virtues of free cross-border capital flows. As I explain in my forthcoming book, The Architecture of Collapse, Camdessus and Delors promoted the idea of a single currency in Europe as a solution to monetary turbulence and as a revulsive for the beleaguered economies on the continent. Germany reluctantly accepted to create a committee to study the matter, which published its report in April of 1989. Its main recommendation was to wait for a long period of time before introducing the single currency. Delors knew very well that, in his own words, "not all Germans believe in God, but they all believe in the Bundesbank." France and Germany appeared to be in sync when the Berlin Wall fell on November 9, 1989, just a few months later. Given France's inability to block German unification, President Mitterrand demanded an acceleration of the calendar to introduce the euro in exchange for not objecting to Chancellor Kohl's plans. As someone mentioned at the time, "the whole of Deutschland for Kohl, half the deutsche Mark for Mitterrand." The euro was introduced ahead of schedule in 1999 as an eminently French project. Germany always feared that it would be impossible to manage a single currency without a single European-wide state, namely, without a fiscal and banking union. Thus, one cannot possibly understand the negotiations in Brussels over the Greek crisis without taking three aspects into account. First, a Grexit puts the entire European project at risk, and places a Sword of Damocles over the euro itself. Second, France wants the euro to be the backbone of European integration. And third, Germany continues to be willing to save the euro, though not at any cost. In this situation, it is hard to predict who will win the battle. European leaders just reached another agreement that will enable them to buy time. I have my doubts as to whether the actual needs and desires of the Greek population are being taken into account. Greeks are spectators in a new Franco-German duel that has replayed itself endlessly for nearly 40 years. I think it has become readily apparent that nothing lasts forever, less so a monetary union of 19 states that lacks the minimum requirements to function properly. If Europe wants a lasting monetary union, it must decide which countries are prepared to honor all of the necessary commitments, and which would be better off with their own currency.

This post originally appeared on HuffPost Spain.