French President Nicolas Sarkozy and German Chancellor Angela Merkel have bickered over the euro, argued about a Mediterranean union and now the global financial crisis is reopening old wounds between them. There had been few public spats since France took over the European Union presidency in July, and they cooperated well over Sarkozy's first big test at the EU's helm, Russia's brief war with Georgia in August. But now the pair have clashed over how to deal with the credit crisis, and Europe's traditional “Franco-German motor” seems to be sputtering just when leaders across the 27-nation bloc are calling for united action to stop the rot. “The relationship between the two leaders is not spontaneously good. They are making enormous efforts on both sides but it is a difficult relationship,” said Dominique Moisi, special adviser to the French think-tank IFRI. Sarkozy and Merkel are due to hold a regular Franco-German meeting in late French President Charles de Gaulle's home town on Saturday, days before a summit of EU leaders that will examine overhauling the Union's financial regulation. Germans were furious last week when Economy Minister Christine Lagarde made public a French proposal to establish an EU-wide rescue fund to help troubled banks. Government sources say senior officials in the German Finance Ministry and Chancellery had made clear their opposition to the fund, which was to total 300 billion euros ($411.7 billion), in private talks with French officials. When Lagarde went ahead anyway and announced the French plans in an interview with German newspaper Handelsblatt three days before a Paris summit of European G8 leaders, irate German Finance Minister Peer Steinbrueck moved swiftly to torpedo it. The French then backpedalled, with both Lagarde and an adviser to Sarkozy denying the 300-billion euro fund plan ever existed. Top German officials say this was wrong. The Paris summit of leaders of the Group of Eight powers that followed produced a pledge to shore up banks, protect savers and regulate markets but fell short of the strong pan-European measures France had been pushing for. A joint Franco-German crisis strategy on the financial crisis appears elusive. Ireland drew criticism from other EU states in announcing its own bank deposit guarantee plan last week. But several other states have since taken their own measures on banks, including Germany, undermining Sarkozy's calls for the bloc to unite. “The problem is that there is not a sufficiently close relationship between France and Germany to compensate for the disagreements among the rest (of the EU),” Moisi said. “The irresistible ‘every man for himself' approach in Europe is no longer compensated for by a perfect Franco-German core.” Sarkozy, 53, and Merkel, 54, often seem diametrically opposed. “Sarkozy is overflowing with ideas. Merkel thinks things through and is focused on the end-result,” said a source in government with knowledge of their relationship. The source played down the depth of their split, saying that on most levels their relationship was smooth, as on Georgia. But there are still scars from the rougher patches. Sarkozy's repeated calls after his election for the European Central Bank to cut interest rates and complaints about the high level of the euro angered Berlin and prompted Merkel to disagree publicly. Sarkozy was forced to water down his cherished project for a union of states around the Mediterranean Sea, emulating Europe's model of reconciliation and cooperation, under pressure from Germany and other member states that felt it was too divisive. He launched the 43-nation union in July. “It boils down to an issue of trust. At this point the German government is not comfortable with the idea of the French taking leadership on a pan-European scheme,” said Nicolas Veron, a research fellow at European think-tank Bruegel. “They are wary of French institutional creativity to try to overcome this significant obstacle,” he added. If such mutual suspicion persists, it could strengthen the view that the Franco-German axis is no longer key in Europe. “We are incapable of accepting the death of the Franco-German motor. Let us look at the world as it is. What was it based on? War. It was the common will to overcome the trauma of war,” one French official said. “The Franco-German relationship today is utilitarian and that's a good thing. When France and Germany have common interests, they defend them. But there are moments when they have no common interest and the advantage of the European Union is that we no longer go to war over that sort of thing.” – Reuters __
