At the invitation of the Hanns Seidel Foundation political scientist Prof. Dr. Roland Sturm of the Friedrich-Alexander-University Erlangen-Nuremberg held a presentation on "The Eurozone Crisis and Franco-German Relations" on June 15th, 2012. The event was hosted by the Party School of the Central Committee of the Communist Party of China (Central Party School) to continue the exchange between Dr. Sturm and scholars of the Central Party School that began during a delegation to Germany organized by the HSF earlier this year.

In his opening remarks Zhao Boying, Head of the Department of Culture and History of the Central Party School highlighted the importance of Europe as a global actor and the deepening Sino-European relations, especially in the economic field. This, however, also means that the eurozone crisis has a direct impact on the Chinese economy and China pays close attention to the developments in the region. As the two most influential countries in the EU, Germany and France are of special interest.

Franco-German cooperation is often seen as the engine of European integration, but, according to Prof. Sturm, the two countries lack a common vision. Due to historical factors, their interests in European integration differed from the start: While Germany was seeking to find a new role in post-war Europe and reengage with its neighbors, France was striving for regional leadership and global influence to counter the United States. These diverging interests led to different political agendas, which were further amplified by contrasting economic views, with France favoring statist economic policies and Germany advocating open trade, combined with a strong global market orientation. It is against this backdrop that within the European Union, France took over a more dominant role in politics and Germany established itself as a leader in the economic field.

Traditional points of contention between the two countries are France’s extensive subsidies for the agricultural sector, its support for “national champions” as well as its reluctance to further open markets on one side, and the pressure the German Central Bank’s monetary policy inadvertently exerts on its neighbor’s economic policy on the other. But differences are by no means limited to national policies, they extend to the European level and have become more evident as the crisis deepens: While France sees the European Central Bank and its monetary policy as an instrument of European economic policy, Germany stresses its independence and sees its primary purpose in fighting inflation. France is a proponent of a European economic integration that empowers governments to create and promote economic growth, as reflected in the repeated calls for an economic stimulus package by Hollande. This is rejected by the German government­―at least as long as it doesn’t entail structural changes in the economy and fiscal policies of deficit countries. Worried about additional liabilities and a public backlash Germany also opposes the introduction of euro bonds, as long as there aren’t mechanisms in place to ensure these countries will move forward with budget consolidation.

But it is not only the diverging economic views of Europe’s two biggest players that hamper a long-term resolution to the crisis, Prof. Sturm explained in the ensuing discussion. Many of the measures that were initiated under pressure to counter the crisis required the creation of parallel structures, but these structures exist outside of the legal framework of the European Union. Furthermore, the fast-tracked transfer of power to Brussels raises problems in regard to national sovereignty, democratic supervision and citizen participation, giving rise to legal insecurities and public discontent. In Germany, the Federal Constitutional Court is continuously checking if planned and taken steps are compatible with the German constitution. Overall, the balancing act between budget consolidation and the provision of public services and promotion of economic growth is a difficult one. One of the biggest challenges lying ahead of governments is the need to face up to criticism and engage the public―an urgent task in light of the recent resurgence of extremist parties.

Despite all problems, the eurozone crisis will accelerate European integration, Prof. Sturm stressed. The crisis has shown that, each member states’ sovereignty over their fiscal policy notwithstanding, legally binding guidelines regarding budget deficits and clear protocols to enforce compliance are necessary for the future development of Europe. The process of integration might not take place simultaneously throughout the European Union, as some member states are willing and able to implement steps faster than others. It should be noted, though, that this phenomenon (also referred to as “multi-speed Europe”) is not a result of the crisis but rather a part of European integration from the beginning.