International relations analysis: Germany and France during the Euro crisis resolution

Résumé du document

Germany and France relations during the Euro crisis implied some disagreements. It started when the European Union decided to manage the global economic crisis at the European stage. It decided to especially manage the case of Greece which is the symbol of the beginning of the Euro zone debt crisis. Indeed, when Georges Papandréou became the Prime Minister in October 2009, he discovered that the former government has hidden some crucial financial points about Greece. The public deficit was not 6% but 12.9%, the public debt represented 115% of the GDP and there was a real problem of tax evasion.

Emergency measures were taken with an austerity plan but were not sufficient. Germany was immediately reluctant to help Greece because of several reasons: the huge economical effort since the reunification, the pressure from the opinion, the Minister of Finance, the elections and the promises made at the Euro beginning not to help the indebted states.But Greece was not the only targeted state. Indeed, there were also Ireland, Portugal and Spain. They are cold the PIGS states. Ireland, Portugal and Spain had troubles because they based their growth on real estate, a sector which collapsed with the global crisis, so that these states made efforts, especially Ireland, then Spain and finally Portugal. But it was also not enough.

Extraits

[...] If too many states suffer from the crisis, the consequences on the Euro could be worse. The Euro could plunge. The survival of the Euro is committed. If the Greece goes bankrupt, the consequences would create a snowball effect in Europe. Indeed, in 2010, more than the half of the creditors of Greece were European states: from France and Germany with and to Ireland with 2.9 These states –their banks, insurance companies, private funds - were attracted by the high remuneration promised by Greece and though Greece could not fall as a member of the European Union. [...]

[...] But how can we be sure that they are in full accordance when Angela Merkel says that the Euro is in danger and that Christine Lagarde, the former Minister of Economy, Finance and Industry of France answers that it is not? It demonstrates some opposition between the two states. Some meetings don't lead to a decision because of the discordance such as the meeting in Frankfort on October 19th 2011. Angela Merkel and Nicolas Sarkozy didn't find an agreement on the ways to resolve the European crisis before a meeting of the Heads of the Euro Zone and European Union members on the next Sunday. Germany didn't agree on the leverage of the EFSF that France supported. [...]

[...] IV/ Conclusion: opinion and recommendations In my opinion, Germany and France will continue to have disagreements on the resolution of the European issues because of the crisis but also concerning other issues. Indeed, they don't have the same point of view as they don't have the same culture, the same past and the same way to manage their territory. Germany seems to be stronger than France for several reasons, especially thanks to its numerous SMEs turned to exportation, whereas France is strong but is not as successful as Germany. [...]

[...] The European Union decided to review its structure. Moreover, the EFSF or European Financial Stability Facility was created on May 9th 2010 to help countries in difficulty: firstly Ireland and Portugal and now Greece. Indeed, the crisis continued to push pressure on the European Union and especially in Greece which situation was not improving enough rapidly. This state needs again help this year. In May 2011, it was a subject of discussions during the G8 as the Greek debt was about 150% of its GDP. [...]

[...] It can save countries as Ireland, Portugal or Greece because Greece represents of the Euro Zone. But if Italy becomes the new target of the investors and markets and that they increase too much the bond rates so that Italy could no more finance itself on the international markets, it would be very complicated because the debt amount of Italy is €1900 billion whereas the EFSF represents now €1000 billion. It is more than 440 but still not enough to save countries like Italy, Spain, Belgium or France. [...]