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On the Franco-German Euro Contradiction and Ultimate Euro Battleground

  • Jorg Bibow
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    Highlighting that France and Germany held largely contradicting hopes and aspirations for Europe's common currency, this paper analyzes how the resulting euro contradiction conditioned the ongoing euro crisis as well as current strategies to resolve it. While Germany generally prevailed in hammering out the design of the euro policy regime, the German authorities have failed to see the inconsistency in their policy endeavors: the creation of a model whose workability presupposes that others behave differently cannot be made to work by forcing everyone to behave like Germany. This fundamental misunderstanding has made Germany the main culprit in the euro crisis, but it has yet to face the full consequences of its actions. Germany had sought every protection against the much-dreaded euro "transfer union," but its own conduct has made that very outcome inevitable. Conversely, having been disappointed in its own hopes for the euro, France is now facing the prospect of a lost generation-a prospect, shared with other debtor nations in the union, that has undermined the Franco-German alliance and may soon turn it into the ultimate euro battleground.

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    File URL: http://www.levyinstitute.org/pubs/wp_762.pdf
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    Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_762.

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    Date of creation: Apr 2013
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    Handle: RePEc:lev:wrkpap:wp_762
    Contact details of provider: Web page: http://www.levyinstitute.org

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    1. C. Randall Henning, 1994. "Currencies and Politics in the United States, Germany, and Japan," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 15, March.
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