On either side of the Channel, the gloves are off. An indignant Pierre Moscovici, the French finance minister, denied yesterday that France was the "sick man of Europe" as he pointed in triumph to the latest French GDP figure. The rise of 0.2 per cent in the third quarter is no splendid soufflé, but it's better than expectations of decline. It makes a nice squib to lob at Anglo-Saxon critics. More importantly, signs of economic life in France are a little eclair to offer Angela Merkel in Berlin, who is worried about the euro zone's economic direction. Anglo-French rivalry is an amusing spectacle but what really matters is whether Germany has the patience to wait for the euro zone recovery.
The Economist started the latest round of sneering with its recent cover story, describing France as Europe's "time-bomb." According to the magazine, the country – which is the greatest supporter of the single currency – is potentially its most serious problem. While other members have sought to shrink the state, in France the public sector has grown to 57 per cent of GDP and the government's solution to recession and low growth has been more borrowing, raising public sector debt to more than 90 per cent of GDP. Added to those macroeconomic difficulties is the red tape and bureaucracy which hinders business creation and explains the continuing drain of young professionals and entrepreneurs to the U.K.. The world sees France's impressive business titans – Total, the oil major, L'Oreal, the global beast of beauty and LVMH, whose fashionistas are conquering the Far East. Back home, however, the small- and medium-sized business sector is weak, far below the level in Britain, Germany or Italy. Meanwhile, the threat of higher wealth taxes has sent more French celebrities scurrying for cover. Even Obelix is moving his menhirs, it seems. Gérard Depardieu, the French actor who impersonated the cartoon character in a recent Asterix film, has bought a home across the border in Belgium, where tax rates are lower and the food is equally good.
The French press are retaliating, notably Les Echos, which today asserts that the City of London is in crisis, with reports of mass sackings at UBS and the Libor scandal, tainting Britain's reputation for fair dealing. It's good, knockabout stuff but it misses the main point, the gnawing doubt that is at the heart of Europe. What does Germany really feel about the European project, and what will it do if things get worse?
Angela Merkel is committed, it seems to sorting it out, imposing fiscal rectitude, a banking union and more centralisation. Still, many observers ask whether it really makes sense for Germany to support its improvident eurozone partners? The country's economy is slowing down after thundering through the last few years in an export-driven boom. It's not the drag from the Mediterranean states but the slowing of China that bothers Germany, these days. Germany's industrial machine will in future depend more on Asia and less on the euro zone.
It is customary to think that Germany needs the euro because that is where it sells. However, exports outside the zone are hugley important and have been growing faster than within. In 2010 non-euro zone exports were more than 80 per cent of exports within the single currency zone, and exports to China are soaring. It is true that Germany is currently benefiting from euro weakness; a retreat to a strong deutschmark would be a challenge for German exporters, but it is one they have managed well in the past. If France fails to pull its socks up, Germany might begin to wonder whether dollar trade is just as good.