A-Franco-German-Tale

IntroductionRarely have economic policy debates between France and Germany been more controversialand more political than during the recent elections in France. While NicolasSarkozy has painted Germany as a model, his challenger François Hollande promised analternative to German austerity. Yet since his election, he has received more German entrepreneursin one month than his predecessor in a year. No doubt, Germany is Europe’séconomie dominante and this fact shapes the ideological controversy between Franceand Germany: here the superior German Social Market Economy with its ordo-liberalprinciples, there either stifling dirigisme or a “laxiste” penchant toward (Anglo-Saxon?)Keynesianism. However, while the debate in earlier years used to be framed in purelynational terms, it has taken a more political-ideological turn recently. Chancellor Merkelfound it “natural” to support her conservative counterpart Nicolas Sarkozy because they“belonged to the same political family”. President Hollande has received the three leadersof the German Social Democratic Party at the Elysée Palace. This social-democratic“axis” seems to have forced Mrs Merkel, who needed parliamentary support at home,to accept a solution for Spanish banks during the recent European Council that she hadpreviously resisted. It may turn out that ideological colourings will become “normal”politics in a future Europe. However, behind these apparently partisan political positioning,fundamental factors are still important for long run policy orientations. This paperattempts to bring some clarifications on the fundamental interests and problems confrontingthe French and German sections of the Euro Area economy.Introductionp. 5