France And Germany, A Love Story : Planet Money Germany and France are tied together by fate. On today's show, the story of France and Germany — the relationship on which the fate of Europe depends.
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France And Germany, A Love Story

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France And Germany, A Love Story

France And Germany, A Love Story

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JEAN-CLAUDE TRICHET: Currency itself is credible. We have problems of financial stability and (inaudible) signature here and there, but the currency itself is very credible.


KELLY CLARKSON: (Singing) Guess this means you're sorry. You're standing at my door. Guess this means you take back all you said before.


Hello and welcome to PLANET MONEY. I'm Caitlin Kenney.


And I'm Zoe Chace. Today is Tuesday, October 18. That was European Central Bank President, Jean-Claude Trichet, you heard on Bloomberg at the top. Today on the podcast, a centuries-old love story, although it didn't start out that way.

KENNEY: A couple tied together by fate, history, geography. But in the beginning, they were always at each other's throats, always out to destroy each other.

CHACE: Until at last they realized, they're not so different. In fact, they have a lot in common. And so they stopped fighting and tied themselves irrevocably together through - what else? - money.



NICOLAS SARKOZY: (Speaking French).

CHACE: There's the happy couple now, French President Nicolas Sarkozy and German Chancellor Angela Merkel. Today, their story, the twisted relationship between France and Germany. A relationship, it's not a stretch to say, on which the fate of Europe depends. And if you understand this relationship, it helps you understand the news coming out of Europe. In fact, this story is so full of drama it's best to do it in song.

KENNEY: We're going to tell you this story today with the help of a Broadway-style show tune, written specially for PLANET MONEY. We have all that coming up. But first, of course, our PLANET MONEY Indicator with our own Jacob Goldstein.

JACOB GOLDSTEIN, BYLINE: Today's PLANET MONEY Indicator, 9.1. China's economy grew by 9.1 percent over the past year. That's according to figures the Chinese government released today. Now, of course, by non-China standards, this is crazy fast growth. So if you take the U.S. economy for example, it's growing at less than 2 percent a year. And even in good economic times, the economy in the U.S. grows at maybe 3 or 4 percent a year. But for China? For China, 9.1 percent growth, that's actually a little lower than expected. And it's the slowest growth has been in China for the past couple of years.

KENNEY: Normally we hear growth slowing and we think, oh, that's a bad thing. And want to be growing, growing, growing. But in China's case, they've actually been growing too fast. And some people are worried that it might have caused a real estate bubble and that inflation is increasing because of it. And so in their case, is this good news, I guess, then, that growth is starting to slow down?

GOLDSTEIN: Yeah. You know, it may be. The Chinese government itself has been trying to slow economic growth. They've been making it harder for banks to lend money. So yeah, this number out today, it suggests that these efforts may be working. You know, I saw some economists writing today that this slower growth could be a promising sign, that it may suggest that China will be able to slow its economic growth without having a economic crash.

KENNEY: All right. Slow growth good. Who knew? Thanks so much, Jacob.


CHACE: Onto the podcast. Throughout the euro crisis there's been one power couple, basically joined at the hip and never appearing in public without the other. It's France and Germany. Just look at the headlines - "Sarkozy to Meet Merkel in the Coming Days on Greece," "Germany, France Hail Debt Progress."

KENNEY: "Preparing the Firehose: Merkel and Sarkozy Set Deadlines for Crisis." "France and Germany Agree on a Plan to Recapitalize European Banks." And sure, France and Germany are the two biggest economies in Europe, so it makes sense that they'd be coordinating their efforts. But this closeness is more about something else, something beyond GDP. It's about history.


CHRISTINA BIANCO: (Singing) Germany, oh, Germany.

JARED BRADSHAW: (Singing) Auf wiedersehen, dear France.

BIANCO: (Singing) We've had a stormy history. But times have changed, so dance wiz me (ph).

BRADSHAW: (Singing) Like zis (ph)?

BIANCO: (Singing) Like zis.

CHACE: As promised, that's our very own Threepenny Opera. Because the story about this relationship is operatic. It's tragic but it has a happy ending.

KENNEY: And of course, there's a twist at the end. As the song says, France and Germany did have a very stormy history. Before they were joined at the hip, they were sworn enemies. And the story of how they got from enemies to lovers explains a lot about what's happening

KENNEY: in Europe today.

CHACE: OK. The story begins in 49 B.C. Julius Caesar is crossing the...

KENNEY: Zoe, wait, wait, wait.

CHACE: Yeah?

KENNEY: You know we only have 20 minutes, right? You can't go that far back in history. How about we go to the year 1866. That sound good?

CHACE: OK - 1866, things are very different back then. France, not Germany, is the largest economic power on the European continent. And in fact, Germany isn't really a country at all.

DAVID MARSH: France was the glorious part of Europe. The Germans were backwoodsmen and had been, more or less, since the Roman Empire.

CHACE: This is David Marsh. You'll be hearing a lot from him because he wrote the definitive history book on the euro. It's called, "The Euro: The Politics Of The Common Currency." So back in the mid-19th century, Germany went by the handle Prussia. And if France was a long-established comfortable kingdom, Prussia was a scrappy neighborhood kid.

KENNEY: And in the early to mid-1800s, this scrappy neighborhood kid was sort of coming into its own - getting stronger and more aggressive. In 1866, Prussia invaded Austria and took over in a matter of weeks.

CHACE: The French were appalled. Prussia was suddenly much larger than France. Smash Prussia and take the Rhine, the French foreign minister told Napoleon III. And the drumbeat began for France to put Prussia in its place.

KENNEY: So in 1870, France waltzed into Prussia thinking it would teach this young upstart a lesson. Again, here's David Marsh.

MARSH: I don't think there's any strategic reason. As far as I know, it was just a series of rather grandiloquent newspaper editorials and all sorts of strange machinations. It was really a war by accident.

KENNEY: A pretty bad accident for France. The Franco-Prussian War lasted just barely one year. And France got crushed.

MARSH: That was a colossal humiliation. And so you could say France is still trying to get over that humiliation to this day because that did actually mark the birth of a new Germany.

KENNEY: Germany was much stronger, much more organized. And now France was deeply in debt to it.

CHACE: France owned Germany lots of money in reparations debts. The Germans said they would keep their troops in eastern France as long as it took for France to come up with the money to pay them. So France began shipping their gold to Germany.

CARL LUDWIG HOLTFRERICH: It was 5 billion gold francs that the French had to pay.

KENNEY: That's historian Carl Ludwig Holtfrerich. Now as regular listeners to our podcast note, Zoe, you and I went to Germany. And we did a bunch of reporting there a few weeks ago. And one of the things we were struck by while we were there was how present the past is in Germany.

CHACE: Even, if not especially, the Franco-Prussian War. A lot of what you think about when you picture Berlin, it was built by those gold francs. Holtfrerich took us on a tour and was just pointing stuff out. For example, the Victory Column. It's this iconic column in the center of Berlin. It has a gold plated angel at the top of it. And you've seen if you've seen any movie that takes place in Berlin.

HOLTFRERICH: That was built after Germany's victory over France in 1871. And it was built from money that the French paid to the German government as reparations.

CHACE: The Germans even used French money to build their capitol building, the Reichstag.

KENNEY: And just for a second, imagine what that's like for France. This backward country all of a sudden puts on all these airs. And they do it with French money. It's like if your neighbor sued you and won, and then all of a sudden they used the money to build a giant addition to their house - out of gold.

CHACE: As galling as these displays were to the French, it was the gold you couldn't see that was even more insulting. Where did Germany keep its gold?

HOLTFRERICH: Within the central bank, the Reichsbank Bank in Berlin. But part of it, which was a nuisance to the French, was kept as a war chest.

CHACE: A war chest. The Germans took some of the reparations gold and they stored it in a castle in another part of Berlin. And it just sat there just in case there was another war.

HOLTFRERICH: It was considered a provocation, of course.

CHACE: It sounds provocative.

HOLTFRERICH: Yes. And actually, it didn't have any value because the amount, you know, was maybe 300 million - something like that.

HOLTFRERICH: which is far too tiny to finance a war. So these...

CHACE: So it was a symbolic...

HOLTFRERICH: Yeah, was a symbolic thing.

CHACE: Symbolic or not, this began a new chapter in the story of France and Germany. It's an era that David Marsh calls The Resentment-Ridden Matrix of Franco-German Politics.

KENNEY: Now, there's a phrase.

CHACE: Exactly. Which I'm pretty into. Germany was now the military and economic equal to France. And they couldn't help but just go at one another.

KENNEY: The next major fight, of course you've heard of. World War I. This time, though, the outcome was different. Germany lost. And this time around, they had to pay reparations to France - a lot of reparations.

CHACE: And that actually didn't work out very well for France. So we talked about this in earlier podcast. German reparations led to massive hyperinflation. And that lays the groundwork for the rise of Hitler and the Nazi Party. And then of course, the second world war.

KENNEY: The Germans crossed the border, the Maginot Line, in 1940. And they occupied Paris for four years.

HOLTFRERICH: And the Maginot Line is, by the way, a young French soldier, François Mitterrand, who plays a role in the whole of the rest of the story.

CHACE: That's right. The same Mitterrand who would go on later to become the president of France.

HOLTFRERICH: Yes. He was captured three times by the Germans. He actually lived in Germany during the second world war as a prisoner of war.


KENNEY: After World War II though, these countries finally break this cycle they had out of invade and occupy. The relationship changes from bitter antagonists to something much cozier.


BIANCO: (Singing) Sometimes we disagree, as many countries so often do.

BRADSHAW: (Singing) First, you invaded me. Zen (ph), darling, I invaded you.

BIANCO: (Singing) You naughty boy, you tried to keep me occupied. Mais oui. But relations would be warma' (ph) if you snuggle up and form a...

CHRISTINA BIANCO AND JARED BRADSHAW: (Singing) European Union wiz me.

BIANCO: Isn't this merveilleux?


CHACE: World War II was a wake-up call to everyone, not just France and Germany. We can't keep doing what we've been doing for the last hundred years - starting wars and bombing each other. In the case of France and Germany though, they decided essentially to stop trying to destroy each other, and work together instead.

KENNEY: And the way this all started is that France and Germany agreed to fuse together their iron and steel industries. In 1951, the two countries signed a treaty with a bunch of other countries promising to make sure that everyone had a regular supply of iron and steel. You can think of it as sort of like a free trade deal. It eliminated customs duties, or taxes, and it made the countries promise not to favor their local production.

HOLTFRERICH: If this was actually an attempt to weld together, literally, the heartstring of German and French power, power of industry, to make sure that those two countries would from henceforth have common cause and that their interests would be aligned. And I think the French knew that it wouldn't be possible to keep the Germans down for too long. And indeed, that wasn't the idea. The idea was to have a strong, vibrant Germany at the heart of a new Europe.

CHACE: OK. So at this point, our protagonists - France and Germany - you could say they were going steady, tying their economic interests together. And the partnership of France and Germany epitomized a new feeling in Europe, that if we're to survive, we are to survive together as partners not as warring individuals.

KENNEY: So other European countries started having their own arrangements like this. They started cooperating and thinking of themselves as an economic union. This is where the metaphor of a romance between France and Germany breaks down a little bit - or gets a little kinkier.


BIANCO: But, mon amour, I was thinking, maybe we should invite some others to join us.

BRADSHAW: Oh h'oh, you mean like a menage a trois?

BIANCO: Somezing like zat (oh). (Singing) Oh, let's invite ze Dutch. Just picture tulips right next to mine.

BRADSHAW: Zat's gouda nuff for me (ph).

BIANCO: (Singing) And for a sweeter touch, some Belgian chocolate would be divine.

BRADSHAW: Yum-yum.


BIANCO: (Singing) And dear, I must admit that I am crazy for Italy.

CHACE: By the late '70s, France and Germany's union was pretty tight. Their economic alliance was strong. The rest of Western Europe was on board with this, more or less. And there was a reason for some optimism. Just 30 years earlier, the entire continent had been at war with each other. And now, here they were rebuilding themselves, cooperating, growing stronger together.


UNIDENTIFIED SINGERS: Let's form committees, then we'll discuss - how we'll endlessly discuss - a European Union for us.

KENNEY: But like any couple that had grown up together, known each other for centuries, there were issues that kept coming up. Many issues. Specifically, whether or not they should share a single currency. France was a big believer. They were really pushing the single currency.

CHACE: Remember that young soldier on the Maginot Line, Francois Mitterrand. Well, he's now the president of France and he's making the case for the single currency. We talked to his right-hand man at the time, an economist named Jacques Attali, who was there during these negotiations.

JACQUES ATTALI: We were, from the very beginning, in favor of the creation of a single currency. We all knew - and it's almost true, more than true today, that the single market cannot work without a single currency.

KENNEY: Germany on the other hand was a little more hesitant. Helmut Schlesinger was the president of the German Central Bank at the time. And he says that Germans were wary about experimenting with currency. Remember, they had that horrible experience with hyperinflation? Since then, they've did everything they could to protect their currency. They love their deutsch mark because they'd work so hard to make sure it was stable. And they didn't want to do anything to upset it. So like many lovers quarrels, Germany agreed with France on the long-term goal. They agreed there should be a common currency for a united Europe. They just disagreed on how to get there.

HELMUT SCHLESINGER: This French idea, that through the money Europe will be united. And here there was the other, the German group, who said, we wanted to have the common currency as the crown of unification of Europe.

KENNEY: And this dispute might have gone on indefinitely if it wasn't for another big geopolitical event.

UNIDENTIFIED PERSON: From the Berlin Wall - take a look at them. They've been there since last night. They are here in the thousands. They are here in the tens of thousands. Occasionally they shout, die Mauer muss weg - the wall must go. Thousands and thousands of West Germans come to make the point that the wall has suddenly become irrelevant.

CHACE: With the fall of the Berlin Wall, Germany doubles in size. And all of a sudden for France, these old feelings come back. Like, has my partner truly changed or will he go back to his bad old ways? Can I still trust a much bigger, stronger Germany? Again, David Marsh.

MARSH: Suddenly, France sees this rather troublesome, rather unquiet eastern neighbor acquiring 20 million more people and appearing to be politically and economically much more dominate.

KENNEY: Other European leaders felt the same. In fact, then British Prime Minister, Margaret Thatcher, came to a meeting with President Mitterrand. And she took a map of World War II Europe out of her handbag. Again, here's Mitterrand's right-hand man, Jacques Attali.

ATTALI: She showed us a map of Europe where Germany would be largest during that time and said, that's exactly what would lead to if we continue like that. Not to German - in Germany of course, but they allow Germany. And we tried to convince her, but it was not (inaudible). She showed it to Mitterrand, Mitterrand (inaudible). There was no real danger if we were able to hook Germany to Europe through the reunification and through the single currency.

CHACE: There was no danger as long as we're able to hook Germany to Europe through the reunification and the currency. Francois Mitterrand was basically saying, we're cool with this reunification of Germany as long as Germany gives up its currency.


BRADSHAW: (Singing) You cannot mean to say zat you would take away ze mark?


BRADSHAW: But ze mark is a symbol of all zat is Deutschland über alles...

BIANCO: Exactement! We cannot truly be a union if we are not tied together financially.


BRADSHAW: ...Call zis currency?

UNIDENTIFIED SINGERS: (Singing) It's called the euro. It's safe and strong.

UNIDENTIFIED PEOPLE: (Singing) Very safe and very strong.

CHACE: High hopes. Again, David Marsh.

MARSH: A new currency would somehow mark the fact that Germany was going to be every bit as pro-European, every bit as community, every bit as helpful and positive with its neighbors as the old West Germany had been. So this was politically, economically, symbolically of the most extreme significance. And the Germans went along with this because they didn't want to be bad neighbors.

KENNEY: This feeling of not wanting to be a bad neighbor, it held sway with other countries throughout the '90s as places like Ireland and Portugal and Belgium applied to be part of the eurozone. It held sway through the 2000s, when Greece joined.

CHACE: And now that those countries are causing problems for the eurozone and there's talk of bailouts, you could imagine Germany, who was against rushing into a monetary union in the first place, turning on France and saying, this is you. This was your fault from the beginning. You rushed this whole thing. But Germany knows better than to call up those old arguments in a public place.

MARSH: It's very much against the modern genetic engineering of the Germans to want to appear to be too overtly dominant in public. Particularly, visibly the French. The Germans are sensitive to French sensitivities. That makes the whole thing unusually complex psychologically.

KENNEY: Now of course, there are strong financial reasons that these two countries have to keep together the European Union. Both countries banks have lent a lot of money to Greece and these other troubled eurozone countries. So bailing out these countries is also partially a bailout of their own banking systems.

CHACE: But Merkel and Sarkozy are also weighed down with their history of conflict. It too defines their relationship and their policy towards the European Union. Attali says, right now, Germany and France have no choice but to always work together.

ATTALI: We are bound to do that because we know each other. But if we don't, we collapse. We are bound. We cannot have another future than together.

KENNEY: We cannot have another future than together. That's why when you see headlines about the Euro crisis, it's never just Merkel on her own. She always has Sarkozy right next to her because they have to act together. They're a couple.

CHACE: They share a currency. And now, they share the same debts. Just like a lot of couples. They're the ones most on the hook for all those other indebted countries in Europe. Breaking up? It's just not an option. It's Germany and France in debt together.


BRADSHAW: (Singing) Zat's it. I've had enough. Looks like it's time now for me to leave.


BRADSHAW: Vhy is ze door locked? You must let me out.

BIANCO: (Singing) Dear, when the times are tough, it's better to give zan to receive.

BRADSHAW: (Singing) You know that isn't fair.

BIANCO: (Singing) But you agreed to share, Cheri.

UNIDENTIFIED SINGERS: (Singing) We're out of funds. You're out of luck.

BRADSHAW: Let me out. Let me out.

UNIDENTIFIED SINGERS: (Singing) Face the fact that you are stuck in European Union...

BIANCO: (Singing) With me.

MICHAEL WEST: (Singing) And me.


UNIDENTIFIED SINGERS: (Singing) So fun to be in...

BIANCO: Very special thanks to Art Pearlman and Jeff London, who wrote that song for us about the European Union, and also to the performers Christina Bianco, Jared Bradshaw, Michael West. David Caldwell was on piano. And Scott Lehrer was their engineer. You can download the whole song on our blog,

CHACE: But that's not all that we have for you. If you want more Franco-German angst to dance to, we also created a Franco-German mixtape. If you'd like the twisted love story between France and Germany mixtape, visit the blog for a special Spotify playlist.

KENNEY: And one more very special mention. Our very own Alex Blumberg and David Kestenbaum are going to be live on the west coast. So if you live in California, they're going to be in Santa Barbara and Chico. That's next week. You can get more ticket information on our blog, I'm Caitlin Kenney.

CHACE: I'm Zoe Chace. Thanks for listening.


UNIDENTIFIED SINGERS: (Singing) So fun to be in - so don't you fuss - a European Union...

WEST: (Singing) Ach du lieber.


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