Tensions Grow Between Germany and France over Austerity

The two nations' disputes always seem to be about money. It was Germany that last year suggested pooling funds within the euro zone through a special joint euro-zone budget, but now the country has given up on the idea again. Merkel had used the initiative in an effort to prevent a renewed discussion about eurobonds at the time. The chancellor initially proposed a figure in the low billions that would go to support, for example, universities in highly indebted euro zone countries. She saw this as a sign of solidarity.

But the idea didn't go far enough for France and the Southern European members of the monetary union, who would prefer a euro-zone budget of over €100 billion that would also fund economic stimulus programs. This counterproposal only served to reinforce Germany's preconceptions about the French. The proposed project won't play a role at the summit this June.

A proposed banking union, which France has pushed for, is likewise failing to move forward. Berlin insists such a union would require amendments to EU treaties, a step Paris opposes. German Finance Minister Schäuble has based Germany's position on the new functions the euro zone states want to transfer to the European Central Bank (ECB). If the ECB takes over responsibility for regulating banks, Schäuble argues, shifting that authority from a national to a European level should be backed up legally by a treaty. Otherwise, national courts -- especially the German Constitutional Court -- could overturn the new rules. France and other countries want to avoid amending the treaties, a burdensome process they say would take too much time.

Nor is the debate concerning eurobonds over. France favors these joint government bonds, for which all euro zone members would share liability, but Germany strongly opposes the idea.

A Tense Feud

At the German Savings Banks Conference last Thursday, Merkel brought up another source of tension within the euro zone, describing the predicament the ECB faces. "When it comes to Germany, most likely the best course of action would be for the ECB to raise interest rates somewhat," the chancellor said, referring to her country's comparatively robust economy. At the same time, she explained, the ECB needs to make more liquidity available for countries that are not doing as well -- in other words, it needs to lower interest rates.

What many people took as interference in the ECB's autonomy actually serves to describe precisely the European dilemma as a whole -- the euro zone is divided not only on the question of what approach to take in tackling the crisis, but also in terms of each country's economic situation.

At this point relations between Berlin and Paris are so tensethat anything has the potential to turn into another battlefield in the feud. A joint Franco-German exhibition of German art currently being staged at the Louvre, for example, met with criticism in German newspapers, which accused the exhibition of reviving old anti-German clichés. Meanwhile, the German government fails to understand one of the steps France wants to take to fight its debt crisis: the closure of its symbolically important and long-standing cultural center in Berlin, the Maison de France.

France's sensitivity also has to do with its continuing weak economy, which is damaging its self-image as an important nation. Additionally, many in France believe that Germany, with its high trade surpluses, is not only benefiting from the crisis, but in fact bears some of the responsibility for it. And France isn't willing to take orders from the same entity that landed it in this situation.

The French government also suspects Germany of taking secret pleasure in its neighbor's current weakness. Leaders in Paris expected Merkel to vigorously refute any talk within her coalition of France as a crisis case, but the chancellor has kept quiet.

France fosters an image of Germany as the bad guy that is only interested in obtaining advantages for itself. "To do politics, you need an enemy, and if that enemy is Germany, that doesn't bother me," Le Monde quoted one leading member of the country's Socialist party as saying.

Demonstrative Disinterest

Meanwhile, France has started showing demonstrative disinterest in European matters. Hollande sent only a low-ranking official without the authority to make decisions to a meeting of negotiators representing euro-zone country leaders last Thursday, an event that ended without results.

Participants in that gathering did little more than express previously established positions. The German representatives refused to discuss the possibility of more money for the countries in crisis. "They had euro signs in their eyes," one participant complained afterward. It was clear to all involved where France's sympathies lay.

Hollande hopes Germany's upcoming elections will bring about a new government that will be more open to his suggestions. Paris knows an electoral victory for a coalition of Germany's Social Democratic Party (SPD) and Green Party is unlikely as things stand now, but believes a grand coalition of the center-left SPD and center-right CDU would be beneficial for France.

There France may be mistaken. Yes, the SPD might well take a friendlier approach toward Paris. Frank-Walter Steinmeier, the party's parliamentary group leader, has said it isn't good "to keep speaking in catchphrases, saying what deadbeats the French are." The Social Democrats are also unlikely to push for austerity as fiercely as the current government has.

At its heart, though, the SPD's position on these issues differs little from Merkel's. When the crisis hit Cyprus, it was primarily Germany's Social Democrats who warned against using German funds to help Russian oligarchs. Similarly, eurobonds as Hollande envisions them will find few supporters among SPD leaders. The SPD also considers reforms in France inevitable, just as Merkel does. "France is in the same situation we faced in 2001," Steinmeier believes.

Hollande will have a chance to find out personally what issues separate German Social Democrats from French Socialists when he speaks at the SPD's 150th anniversary celebration in Leipzig on May 23. Hollande also may find he doesn't enjoy the company at the podium so much -- he's scheduled to appear side by side with Merkel.

REPORTED BY HORAND KNAUP, RALF NEUKIRCH, CHRISTIAN REIERMANN AND MATHIEU VON ROHR

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• Part 1: A Deep Frost in Franco-German Relations
• Part 2: Bickering over Money