The background to the austerity versus growth meeting between the leaders of the eurozone’s two biggest economies – Francois Hollande and Angela Merkel – is a big contrast in their economic fortunes.
In Germany both exports and domestic consumption have mostly grown. France is experiencing weak demand at home and slowing exports.
The numbers tell the story: In the first three months of this year, French growth evaporated, Germany was the region’s strongest performer. Ten percent of French workers are without a job — in Germany it is 5.6 percent. French debt as a percentage of economic output is much higher.
Michael Hewson, a market analyst with CMC Markets, said: “There’s a lot of uncertainty with how a new French president would change the political dynamic between Germany and France. I mean, Mr Hollande has already said he wants to renegotiate the fiscal compact, Angela Merkel has implicitly ruled that out. He’s also gone on record as saying that he wants to raise the minimum wage and reduce the retirement age, well that’s really going to grate with Germany.”
Merkel and Hollande may have contrasting styles as well as economies but know they have to get on for the greater good and to save the euro.
The problem is finding consensus on the right balance between austerity and growth with the nervous financial markets looking on.