Saturday, March 10, 2012

Franco-German Differences

From the Times:
Ms. Lagarde, 56, and Ms. Merkel, 57, appear to be opposites, the glamorous, Chanel-clad French extrovert and the grounded German introvert, recently spotted doing her own grocery shopping in the same suit jacket she had worn to sign the new European fiscal pact in Brussels earlier that day.
Try to imagine Sarkozy doing his own grocery shopping. But the more important Franco-German difference is not Chanel vs. whatever Frau Merkel wears, nor is it the difference between Lagarde and Merkel over the size of the emergency backstop for the euro (Lagarde is right). It is rather the difference between the French and German governments about the need to promote growth and how it should be done (Lagarde and the IMF are closer to France, I believe). For tactical reasons, Sarkozy has soft-pedaled his differences with Merkel on this score, but they exist. Remember this when Sarkozy attacks, as he surely will, Hollande's call for a "renegotiation" of the euro agreement. Sarkozy has painted this position as irresponsible, as he must, but he, like Hollande, cannot leave Germany's beggar-thy-neighbor inclinations unchallenged.

The Eurozone needs stimulus, rebalancing, and structural reform, and Germany is one of the few countries that can afford to spend in the current situation. The announcement by Volkswagen of a substantial bonus (up to €7 500) for workers in its various divisions is a promising sign. One wonders if the German government played a role in VW's decision to distribute its record profits and boost the spending power of its workers. In any case, it's good news for Europe, and one would hope to see more of the same out of Germany. On her next shopping trip, in addition to groceries, Frau Merkel should buy Greek olive oil, Italian shoes, and French pharmaceuticals.

1 comment:

Merlin said...

From "Laboratoire Servier" I presume.