Often snapped by cameras in various stages of awkward embraces, determined handshakes, or intense discussions, Angela Merkel and Nicolas Sarkozy are often collectively referred to by the moniker “Merkozy,” suggesting both their political and personal closeness. It is not surprising: after all, the German Chancellor and French President are the stewards of the Eurozone’s two largest economies. Together, Merkel and Sarkozy represent the face of Europe—and more specifically, of the great experiment in regional integration that is the European Union. But the sovereign-debt crisis plaguing several European nations has introduced questions about structural inequity between members, putting the unity of Merkozy—and that of the Eurozone, the 17-nation bloc within the EU that uses the Euro—at risk.
CRACKS IN THE SINGLE CURRENCY
The recession of the late 2000s has spurred a sovereign-debt crisis that infecting several countries and exposing weaknesses in parts of the Eurozone, a region once lauded as an example of effective currency integration. Greece, Ireland, and Portugal have all found themselves unable to pay their debts and have sought external assistance. Disquieting political, regulatory, and economic differences between the Eurozone’s member states explain how some nations can remain fiscally sound while others teeter on the edge of default. Greece’s appalling tweaking of financial data has cast doubt over the standardization of finance-related laws in the Eurozone; weakness in Italy, the pact’s third largest economy, mirrors productivity issues in the rest of southern Europe; and Ireland’s inability to pay back its debt raises concerns about the stability of EU members hitherto considered secure. The sovereign-debt crisis has resulted in bailouts amounting €750 billion to date that have saved all of the affected nations from default. While thus far only the three aforementioned nations have received funds, many are concerned that the same fate may soon befall the larger economies of Spain and Italy. Germany has emerged as a bastion of sound economic policy during the crisis and as a result, the Eurozone’s largest economy is now also its largest donor. Jan Fleischhauer, a popular German journalist, claimed in Der Spiegel that Germans have become the “Americans of Europe,” referencing the United States’ role in postWorld War II reconstruction.
A TALE OF TWO CITIES
Germany’s stability and leadership throughout the crisis has not been met by its foremost ally, France, pointing towards the growing economic divide between the two nations—due primarily to a lack of competitiveness and productivity in France. While the French economy is nowhere near as unstable as those of the weakest Eurozone members, its sluggish rebound after the global recession stands in stark contrast to Germany’s quick recovery. The divergence is evident in the unemployment rates of the two countries. In France, unemployment is at 10 percent—a 12-year-high, according to Eurostat, the official statistics body of the EU. In Germany, it is at 5.8 percent—Germany’s lowest since reunification in 1991. Confidence in the French economy was shaken in January when France lost its AAA+ rating from Standard & Poor’s, one of the three big credit-rating agencies. Germany maintained its AAA+ rating.The differences between France and Germany are nowhere as apparent as in an analysis of two towns along the countries’ border: Sélestat, a French town in Alsace, and Emmendingen, a German town barely 20 miles away. According to a recent investigation by the New York Times, despite similar demographic and geographic conditions and an interwoven history, unemployment in Emmendingen is at three percent, while in Sélestat it is at eight percent. The difference in youth unemployment—often a primary cause of social distress—is even greater.There are nearly 10 times as many job offers per month in Emmendingen as there are in Sélestat. German workers often take the initiative to cross the border and work in France; their counterparts rarely do the same. Salaries in the German town are higher, goods are cheaper, and the costs associated with hiring an employee lower. Such disparities are typical of the economies of the two nations, but are more striking simply because the towns are so close to one another. Some locals on the French side attribute the differences to culture: “We appreciate their rigor and discipline, but that’s not all there is in life,” Alexandre Boer, 52, told the New York Times.
A LITTLE TOO MER-COZY
While the French and German economies may be diverging, their leaders have continued to project an image of unity. During their terms in office, Merkel and Sarkozy have collaborated on virtually every issue, from the financial crisis and the Greek bailout to political action against states like Syria and Iran. In nearly every case, they have showed solidarity and support for one another. In February, the BBC reported that Merkel had taken the unusual step of involving herself in the elections of anothercountry by throwing her weight behind Sarkozy for France’s upcoming elections in April. Her party, the Christian Democratic Union, also released a statement saying that she would “actively support Nicolas Sarkozy with joint appearances in the election campaign in the spring.” Merkel’s endorsement has not come without reciprocity from Sarkozy. The French President has been promoting German-style labor reforms for France to counter the growing economic gap between the two nations: “Inspired by a model that works, we will bring together, Mrs. Merkel and I, the German and French economies to create at the heart of Europe a solid economy that then may conquer markets across the world,” Sarkozy declared in a joint interview with the Chancellor, as reported Le Monde. For Germany, a stronger France would mean a stronger Eurozone, which would in turn ensure more political and economic clout.
THE GERMAN CANDIDATE
But labor reform has never been an easy sell in France, a country that is dependent on social welfare and more accustomed to shorter working hours than many of its peers. After the French legislature voted to raise the retirement age from 60 to 62 in 2010, near-retirees and youths alike erupted in riot. “I started working at 17 and now I’m 50 and I’m starting to get really fed up with it,” one demonstrator in the town of Angouleme told Agence France Presse, reflecting an attitude that resonates with much of the French public. The nation’s employment system remains fundamentally socialist in nature, with an emphasis on job security and a heavy reliance on powerful unions to advocate interests. Germany, meanwhile, boasts a flexible hiring-andfiring system that delivers higher gains in productivity, though at the loss of employees’ security. In France, Sarkozy’s calls for reform have not been met with widespread enthusiasm. His primary opponent, the Socialist Party’s François Hollande, has rejected labor market reform. “Not everything in Germany’s economic model deserves to be copied,” Hollande’s campaign chief Pierre Moscovici told Reuters.Hollande’s stance echoes another concern that many in France are beginning to develop—that of a French President in the pocket of a Germany seeking to dominate Europe. The news channel France 24 declared Sarkozy the “German candidate” and voices from across the political spectrum have decried him as nothing more than Merkel’s lapdog. Former Minister of Defense Jean-Pierre Chevènement, for example, called their relationship “disastrous.” A survey administered by Le Figaro found that 41 percent of respondents believed that Germany was seeking to dominate France through its stewardship of the debt crisis. Negative publicity has prompted the Sarkozy campaign to pull away from Merkel, telling the Wall Street Journal that plans to include her in a rally were “not on the agenda.”The unity of the entity that is Merkozy only thinly veils the cracks in the two nations’ relationship.While they continue to actively collaborate on international and European affairs, their economies diverge, with France’s faltering and Germany’s powering ahead at full steam. In April, French voters will decide whether or not to oust the incumbent Sarkozy. The latest opinion polls indicate that Sarkozy may well lose to the Socialist Hollande by 10 percent or even more. If Sarkozy manages to keep the Élysée Palace, he will almost certainly continue to push labor reform, and resentment toward Germany may rise. Such close collaboration with Merkel may then become harder to digest in France. It may be inconceivable that Germany and France will ever retreat from one another entirely given their extensive economic and political ties. But if Sarkozy loses and the presidency goes to Hollande, Merkel should not expect “Merlande” to enter political parlance.
MUHAMMAD SAIGOL B’12 wants a moniker of his own.