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Greece debt crisis continues to expose European divisions

It had to be said, but few believed it. The
Greek crisis has exposed a fault line:
France and Germany do not share the
same vision of Europe.
Gen Charles de Gaulle had described
Europe as "a coach and horses, with
Germany the horse and France the
coachman". The two countries together
are the engine room behind the European
project.
After Angela Merkel won her third
election, in 2013, she was crowned "Frau
Europe". The Allgemeine Zeitung paper
commented: "On this continent,
everything will require the consent of
Angela Merkel."
Even Le Monde, recognising that the
French-German relationship was
undergoing a fundamental change, wrote:
"Angela Merkel, Chancellor of Germany,
Chief of Europe".
Germany was a reluctant colossus, but it
had become Europe's indispensable
nation.
Power shift
It was summed up in this exchange a few
years ago between Mrs Merkel and
President Sarkozy of France.
Mr Sarkozy had turned to Mrs Merkel and
said "We are made to get on. We are the
head and legs of the EU."
"No, Nicholas," the German chancellor is
said to have replied, "you are the head and
legs. I am the bank."
So power shifted in Europe. France may
have had a certain idea of Europe, even a
vision, but Germany had the economic
muscle.
When it came to the Greek crisis, two
different motives were driving France and
Germany. The French president believed
in the Europe of solidarity; the German
chancellor believed in a Europe of rules
and responsibility.
In the recent Greek saga, France was not
just the mediator between Germany and
Greece. It advised Greece on its last
proposal, which it quickly described as
"sensible and credible". Berlin bridled at
this.
'Brutal' tactics
It was not long before a German paper
suggesting Greece take a "timeout" from
the eurozone surfaced during the summit.
Francois Hollande dug in. "There is a
rather strong pressure for a Greek euro
exit. I reject that," he said. He dismissed
the idea of a temporary Greek departure.
"There is Greece in the eurozone or not in
the eurozone, but in that case Europe
retreats," he said.
The French lifted the argument above the
detail of pension reform and VAT
increases. This was about the future of the
European project, and if Greece departed
it would mark the end of European
integration.
For the Germans it was about trust. They
no longer believed that the Greeks would
implement what they agreed to.
Mrs Merkel was determined that in
exchange for a third bailout, Greece was
locked into a reform programme. But in
so doing, it has enabled others to brand
the German tactics as "brutal" and
enabled the Greeks to present themselves
as victims of blackmail.
The economist Paul Krugman, who has
been a consistent critic of German-led
austerity, described the deal as a
"grotesque betrayal of everything the
European project was supposed to
stand for".
Will it work?
The division between France and
Germany has continued. The French
parliament agreed - even before the Greek
parliament voted - that the Greek
proposal could pave the way for talks on a
third bailout. The Bundestag, the lower
house of the German parliament, is
meeting only on Friday.
The French Prime, Minister Manuel Valls,
said: "We are demanding a lot of the
Greeks, not just to punish them, but to
accompany them through a vital
recovery."
As negotiations with Greece continue, the
bigger question is whether this new
bailout will work. I find very few
believers.
More money is being lent to a country
deep in debt. The economy, this year, will
contract by between 3% and 5%, and yet
some of the new measures, in the short
term, will only depress the economy
further.
The whole plan depends on Greece
delivering a sustained fiscal surplus, which
seems unlikely.
The recapitalisation of the banks is
dependent on the privatisation of some of
Greece's most valuable assets. Previous
privatisation programmes have run into
the sand.
The International Monetary Fund (IMF)
has indicated it believes Greece's debt is
"highly unsustainable".
And to cap it all, the German Finance
Minister, Wolfgang Schaeuble, said that
many in the German federal government
were "pretty well convinced that a [Greek
exit] would be a much better solution for
Greece".
So the Greek question may return. It nags
away at the essence of the European
project.
Will it remain caught in a halfway house
between further integration and
preserving the nation state? Or will it use
this crisis to propose a tighter union?
What is clear is that France and Germany
are managing Europe but they do not
share an idea for its future.
In his statement at the end of the summit,
the French president said that Europe
"first and foremost must be European"
and must not be "at the service of one
public opinion or one 'national'
parliament".
In other words, Germany should not
define the argument.

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