Couples Retreat

There are many reasons why marriages fail, but often the culprit is disagreement over money. Apparently, countries joined in long-term political unions behave no differently than spouses. Such is certainly the case for France and Germany, whose partnership forms the backbone of that ever-expanding, increasingly motley family known as the European Union. But the family has now fallen on hard times — cousins have loans coming due they are hard-pressed to make good on, Spain, Ireland, Italy, and Portugal among them. If a widening sovereign debt crisis, a common currency in free fall, and austerity plans weren’t enough bad news for Europe, it appears that the already rocky relations between French President Nicolas Sarkozy and German Chancellor Angela Merkel have reached a new low.

Last month, an unidentified source told El País that Sarkozy banged his fist on the table and threatened to leave the euro if Merkel didn’t agree to a Greek bailout. She did. This past Monday, the chancellor suddenly canceled a tête-à-tête dinner with the French president. Tit for tat? But Berlin claims it was Paris that stood them up. The EU Summit that begins today in Brussels comes just in time, then. For it’s not only Sarkozy and Merkel’s partnership that needs couples therapy, but the larger relationship between European governments and their peoples, who are increasingly dismayed at the breakup of a social compact that has produced unparalleled peace and prosperity over the past half-decade.

The French-German pair makes for Europe’s oddest political couple. Sarkozy’s hyperactive yet casual cockiness is a foil to Merkel’s dogged solidity. Where he is effusive, she is reserved. Apparently, she can no more stand his Gallic cheek-kissing ways than her government can stomach Paris’s hands-on proposals for addressing Europe’s financial crisis. As far back as 2007, rumors were flying so thick about Merkel’s distaste for Sarkozy’s cuddliness that a German government spokesman felt obliged to tell the Daily Telegraph that, au contraire: "The chancellor rejoiced in the president’s warm greetings." Things have only gone downhill since.

Does the evident friction between Sarkozy and Merkel suggest that the French-German motor that has powered Europe for the past 60 years — and has often required minor tuneups along the way — might finally be falling apart? On the eve of the EU summit, all the two leaders could agree on was a prohibition against the naked short-selling of some shares and bonds. They’ll have to do better than that. The meeting promises a growth strategy for Europe leading up to 2020 and is intended to produce the basis for reforms Europe would like to see in the international financial order in advance of the G-20 meeting in Toronto at the end of June. But it is precisely around the question of exactly how to ensure that the European Union never again faces a sovereign debt crisis such as the one Greece precipitated earlier this year that France and Germany have trouble agreeing.

Sarkozy attempted to seize the opportunity created by the crisis to establish a eurozone secretariat, an economic if not a political government that would take the management of the EU’s economic policy out of the hands of central bankers and finance ministers who are widely seen to have bungled their jobs. Not surprisingly, EU finance ministers — backed by Germany — categorically rejected this attempted coup. With Jean-Claude Trichet at the head of the European Central Bank and Dominique Strauss-Kahn at the helm of the International Monetary Fund, Merkel might have felt she was already encircled by Frenchmen bullying her on economic policy. The chancellor stood firm. Sarkozy backed down, telling reporters in a joint news conference days before the summit, "We would be better off making the European systems a bit lighter by not creating institutions, to focus instead on being more pragmatic." Merkel couldn’t have put it better herself.

These are not the sorts of disagreements that France and Germany, the backbone of the European project, have traditionally aired in public. But could this be a sign of maturity rather than failure? Europe expert Christian Lequesne, director of the Center for International Relations Studies and Research at Sciences Po in Paris, notes that for these leaders born after World War II, "Europe is something that has been achieved. The French-German relationship is now ‘interest-driven’ not ‘values-driven.’ Lequesne explains that though Sarkozy must take into account Germany’s economic power, the country simply doesn’t fascinate him in the same way Britain does. Merkel, with her East German origins, also feels no particular affinity with France. "She often sees France in terms of well worn clichés, an arrogant country, lacking in discipline," Lequesne continued. Still, she too must accommodate France, particularly for the political weight it carries in Europe.        

Like it or not, the two countries are stuck with each other. In a show of solidarity over the weekend, France stunned many observers by joining Germany in announcing austerity measures. After denying austerity was in the works for months, Prime Minister François Fillon pledged to cut 45 billion euros from the nation’s budget and raise the retirement age to 62 years. He told a meeting of new members of his political party, UMP, "We’ve made a commitment to bring down our deficit from 8 to 3 percent by 2013, and we will concentrate all of our efforts on it." France, like Germany, now has the credibility to ask the European Union’s profligate members — including Greece — to drink the same bitter medicine and cut their bloated deficits down to size.

Predictably, French citizens are already hitting the streets: The militant union Force Ouvrière organized a protest of between 23,000 (according to police estimates) and 70,000 (according to the organizers) in Paris on June 15. But the backlash to austerity promises to be pan-European: Following violent protests in Greece last month, 75 percent of Spain’s civil servants staged a strike on June 8, and 20,000 protesters took to the streets of Berlin on June 12. Unions across Europe are uniting to plan a huge demonstration in Brussels on Sept. 29 with the theme of "Yes to more growth. No to austerity measures."

As Reuters reported on June 10 during the meeting of the International Labor Organization (ILO) in Geneva, the view of European unions is that "ordinary families are being asked to pay for the crisis three times — first as taxpayers to bail out the banks, second as workers with lost jobs and cut wages in the recession, and now as citizens with cuts in pensions and social services." It doesn’t help Sarkozy that the announcement of austerity measures comes bang in the middle of the trial of Jérôme Kerviel, the dashing young trader at Société Générale whose hugely leveraged bets lost his bank more than 5 billion euros in 2008 and who epitomizes the culture of financial profiteering many French blame for their current woes.

It promises to be a long, hot summer for Sarkozy, whose popularity ratings ahead of the austerity announcement had already dipped below 30 percent. Still, Sarkozy is in a better position to take political risks than Merkel. Last month, the chancellor suffered the wrath of German voters — who resent being asked to tighten their belts to bail out easy-living countries such as Greece — and lost her majority in the upper house of parliament. Like Sarkozy, her poll numbers have sunk to new lows: In Germany, calls are mounting for Merkel to dissolve the Bundestag and hold early national elections. While Sarkozy  may not survive the next French election (were the vote to be held today, polls show that Dominique Strauss-Kahn would win), Merkel may not even survive the next few weeks.

If Merkel pays the ultimate price for failing to reconcile German domestic sentiments with European crisis containment and loses her chancellorship, her departure will see the end of a pairing that both fascinated and frustrated. Merkel’s fall would take down with it her pro-business coalition government of Christian Democrats and Free Democrats. As yet, however, given Germany’s divided political scene there is no clear alternative — despite assurances to the Stuttgarter Zeitung newspaper from Sigmar Gabriel, head of that the Social Democrats, that the party could "immediately take over the government."

No doubt, Sarkozy would spend little time mourning Merkel’s departure. No matter the dance partners, the pas de deux between France and Germany will continue. The future of the European Union and its single currency depend on it. But more alarming than the friction between Paris and Berlin is the growing divide between European leaders and their citizens. Unless the European Union comes out of the summit this week and goes into the G-20 meeting at the end of June with a strong and united front in favor of imposing pain on banks and other financial institutions equal to what they’re demanding from their citizens, it won’t just be Sarkozy and Merkel’s relationship that will be on the rocks — but the larger social compact that forged the European welfare state in the postwar era. All the more so if overly aggressive austerity measures stall recovery and plunge Europe into a long recession, as economists Joseph Stiglitz and Paul Krugman have warned. This is the real and very tangible threat to the European Union, and for the sake of the family, Merkel and Sarkozy had better put aside their personal differences and start getting down to business.