Sammantha Giles: The Failing Relationship between France and Germany during the Global Debt Crisis

June 12, 2013

The financial crisis in Europe is a known economic issue that came to head as

Greece could not pay back loans and fell deeper into debt, but there is another part to the issue; the relationship between France and Germany. These two countries have had an economic relationship where they feed off of each other’s successes and failures in the global market. The issue is between the two nations and has effects on a continental scale and global scale, as Germany makes up nearly one third of the European market value. Germany’s market value as a leading global trader is a part of what caused the issue, due to the continuing success of the German economy after the rest of Europe was threatened with a recession. Germany had a separate economic plan and wanted independence from the European Union to maintain their continuing economic rise without having to spend their money on the debt that took hold over the rest of Europe. This sparked the beginning of the conflict in 2011 as world leaders were getting ready for the world G summit.

The financial market of Germany and France were usually at opposite ends of the spectrum, where Germany usually had a higher market value and allowed France to strap on to their success. The big difference between the economies of France and Germany are two differing political systems, France has a president and a political set up similar to the USA. Germany has a chancellor that is head of the government where the French president is a chief of state, not government. Germany and France have always been two nations with stronger economies that most European nations. The difference between the policies is the focus of economic actions, meaning that Germany focuses on their self-interests while France supports the economics held in place by the majority of countries in the European Union.

Frances continuing support of EU policies that have caused the debt crisis to occur is one of the reasons that tensions escalated between Germany and France. France supported a bill to raise takes to help Italy and Spain pay off their debts and help re-start the economy. Germany did not support this and did not want to raise taxes as the people of Germany were not in any financial crisis and did not need to pay extra to keep their economy running.

There are other causes like France has high spending and is drifting away from their long-time partner, Germany. The German dis-trust of the EU has gone up 10% in the last year, while Germany is becoming one of the most trusted European countries and France is falling apart. France has gone into a recession as of January 2013.

The recession hitting France is a recent development in Europe and was influenced by the support France gave to the EU to pay off debts and repair the financial markets in Europe. While France has gone into a recession and Germany is trying to be independent there is still a close relation to the two nations. In May 2013, Germany started seeing the first signs of a recession occurring in their economy. This is an impact of the European debt crisis had on the economy and with Frances support efforts for failing bills the relationship that France had with Germany suffered.

France and Germany are two of the largest economies in Europe that depend on trade with the other for their economies to thrive. As the recession hits France and their industries are shrinking to minimize the damage done while trying to keep spending of consumers up, the less production being done is causing the French trade industry to shrink as less supply is made. Since Germany needs the trade done between themselves and France, as it diminishes the German economy suffers. The German economy is on the edge of a recession and would be the last EU nation to fall over the edge.

The Impact that Germany has over the European and world market is in jeopardy with the risk of a recession but it is also the hope to come out of the recession. The two markets of France and Germany, being the strongest, are looking for investment opportunities to restart the economy. France has invested in Europe, to help bring other nations out of debt. The way the global market is currently being run it suggests for investment in China, USA or other developing countries to make a substantial profit. The increase in revenue from investments could help with the risk of recession in Germany and France, while giving them the ability to jump start the EU again.

There are no large investment opportunities in Europe that will pay out right now as unemployment is up to 19 million and there is little to no spending budget to keep consumers spending and for the product to be created. The impact that is has is seen in North America and Asia, not just among the people of Europe. Imports and exports have gone down; this lowers the value to the Euro and other European currency, which is used to be nearly double the value of the American. The decreasing value of money in Europe is affecting the global financial market as they have some of the highest valued currencies, and as they decrease in value so the whole of the global value.

The fall of Germany into a recession and the loss of European biggest economic alliance would have major impacts on the global market. The lack of funds in Europe stops them from coming out of the debt crisis. If the two largest economies fall them the whole EU will as well. Going forward there needs to be new economic policies and the creation of new investment opportunities. Stabilization of the market between France and Germany would be step one, to keep Europe’s super powers on the same page and to re-boot Europe’s economy.

There needs to be reconciliation between the economics of France and Germany if Europe wants to end the debt crisis.

APA Annotated Bibliography

 Europeans disillusioned and divided by debt crisis, survey finds | Business | The Guardian . (2013, May 14).  Latest US news, world news, sport and comment from the Guardian | guardiannews.com | The Guardian . Retrieved June 10, 2013, from http://www.guardian.co.uk/business/2013/may/14/europeans-disillusioned-divided-debt-crisis

This website I used to get a general knowledge on the state of the European Union and Germany’s state after and during the global debt crisis.

Beard, S. (2013, May 8). Austerity rift chills French-German relations | Marketplace.org. Marketplace from American Public Media: Business, The Economy, Personal Finance, Wall Street and World News. Retrieved June 10, 2013, from http://www.marketplace.org/topics/world/european-debt-crisis/austerity-rift-chills-french-german-relations

This website gave me the knowledge of why there is a rift between France and Germany and explains the problems that the two countries face.

Europe’s banking union: Till default do us part | The Economist. (2013, June 8). The Economist - World News, Politics, Economics, Business & Finance. Retrieved June 10, 2013, from http://www.economist.com/news/finance-and-economics/21579024-half-hearted-banking-union-raises-more-risks-it-solves-till-default-do-us

This website talked about the political policies that differ between France and Germany and the different ways that their economies are being run under two different types of political leaders.

France and Germany: A tandem in trouble | The Economist. (2013, May 4). The Economist - World News, Politics, Economics, Business & Finance. Retrieved June 10, 2013, from http://www.economist.com/news/europe/21577100-european-union-fretting-over-widening-gulf-between-two-partners-have-always

This article goes over the past history between France and Germany and how it is crumbling under the debt crisis and economic policies.

Traynor, I. (2013, May 14).  Eurozone crisis sees Franco-German axis crumbling | Business | guardian.co.uk .  Latest US news, world news, sport and comment from the Guardian | guardiannews.com | The Guardian . Retrieved June 10, 2013, from http://www.guardian.co.uk/business/2013/may/14/eurozone-crisis-germany-france

This article focuses on the crumbling financial state of France and the crisis with its alliance in Germany as an economic partner that is going towards a different economic future.

Emmott, R., & Marsh, S. (2013, May 15).       Germany can't stop euro zone from sinking into longest recession| Reuters. Business & Financial News, Breaking US & International News | Reuters.com. Retrieved June 11, 2013, from http://www.reuters.com/article/2013/05/15/us-europe-economy-idUSBRE94E09J20130515

This website gave me information on Germany’s current economy and where the EU is headed since Germany’s economy is now falling too.

Waterfield, B. (2012, June 28). Debt crisis: France and Germany clash at euro summit - Telegraph. Telegraph.co.uk - Telegraph online, Daily Telegraph, Sunday Telegraph - Telegraph. Retrieved June 11, 2013, from http://www.telegraph.co.uk/finance/financialcrisis/9363203/Debt-crisis-France-and-Germany-clash-at-euro-summit.html

This website I got historical information on when the tensions between France and Germany came to head and how long the issue has been happening for along with reasons for it.

Pop, V. (2013, June 5). EUobserver.com / Economic Affairs / France to reform or fall behind rest of Europe, IMF says. EUobserver.com / Headline News. Retrieved June 11, 2013, from http://euobserver.com/economic/120372

This website gave me current information on where France’s economy is headed and the future continuing decline of France if they continue on the same path.

Fox, B. (2013, April 11). EUobserver.com / Economic Affairs / EU criticises France on economic 'imbalances'. EUobserver.com / Headline News. Retrieved June 11, 2013, from http://euobserver.com/economic/119760

This website is about Germany, and other main EU members opinions on France and their continuing economic downfall, it gave me information on the possible course of action the EU could take against France for their poor economic activity.