The Clash of Titans/the White Knight and the Iron Lady: France, Germany and the simultaneous double game of EMU reform, A Crespy, V Schmidt

Tags: Germany, Europe, France, Eurozone, solidarity, German Chancellor, Angela Merkel, European countries, French President, Nicolas Sarkozy, economic policy, Sarkozy, Cambridge University Press, European elites, national level, European Integration, interactive processes, national leaders, economic governance, German leaders, Oxford University Press, Eurozone crisis, European leaders, European Union, policy ideas, intergovernmental institutions, European Integration Studies, West European Politics, intergovernmental treaty, Eurozone countries, European Journal of International Relations, International Organization, Cornell University Press, French leaders, Eurozone debt crisis, President Nicolas Sarkozy, frame, N. Sarkozy, price stability, Stability and Growth Pact, loan guarantee, intellectual elites, political elites, discourses, Libre de Bruxelles Vivien Schmidt, Chancellor Angela Merkel, European Financial Stability Facility, policy change
Content: Paper prepared for delivery to the ECSA--Canada meetings, April 27--28, 2012. Recipient of the best paper award of the ECSA--Canada Association 2012. THE CLASH OF TITANS/ THE WHITE KNIGHT AND THE IRON LADY FRANCE, GERMANY AND THE SIMULTANEOUS DOUBLE GAME OF EMU REFORM Amandine Crespy, Universitй Libre de Bruxelles Vivien Schmidt, Boston University Introduction In the aftermath of the EU's enlargement towards Central and Eastern Europe, many scholars and observers of European integration were proclaiming that the French--German "engine" of Europe had come to an end. The political legitimacy of French--German initiatives was contested by coalitions of smaller Member States and the "new Europe" was calling for new leadership dynamics. However, the Eurozone debt crisis currently shaking the Union provided dramatic evidence that no alternative to the Franco--German partnership has yet to emerge in the enlarged EU. In times of crisis, where the very existence of the Eurozone is under threat and the need for major reform of EU governance glaringly obvious, Franco-- German initiatives appear to have remained the basic dynamic of integration. However, unlike in the past, agreements on steps forward have proven to be particularly difficult. This is largely due to these countries' contrasting political economic policy ideas, cultures, and practices. The Eurozone crisis itself was `read' very differently by the two countries, which also prescribed different solutions on different timetables. As the crisis initially unfolded, French leaders continued to prescribe neo--Keynesian stimulus; described the problem as one of mutual responsibility resulting from imbalances between deficit countries (read Southern Europe) and surplus countries (read Germany); recommended deeper integration through greater gouvernance йconomique (economic governance) along with a range of policy innovations; and preached solidarity in response to the Greek debt crisis together with a quick bailout to stop escalating market concerns beginning in January 2010. By contrast, the German leadership delayed action, first pushing Greece to solve its own problems with a discourse about public profligacy and `lazy Greeks;' and only when the crisis was ready to explode did it agree to a loan for Greece at punitive market rates on May 3, 2010, followed by a new loan guarantee mechanism--pushed by France and even a telephone call from US
President Obama--on the weekend of May 9--10, as market contagion threatened other European countries (the infamously named `PIGS'--Portugal, Ireland, Greece, and Spain--the additional `I' for Italy comes a year later). 1 On this historic occasion, a deal was brokered in which France got some of the political (economic) institutions and policy actions it most wanted, including a bailout for Greece and a loan guarantee mechanism--the European Financial Stability Facility (EFSF)--for countries under threat, in exchange for accepting German political economic policies and philosophies. These included enforcing ordo--liberal macroeconomic principles of austerity budgets across Europe, accepting the creation of a further treaty--based loan guarantee mechanism, the European Stability Mechanism (ESM), and agreeing to reinforce the Stability and Growth Pact (SGP), giving it more teeth through fines and sanctions. Subsequent episodes in the saga of the Eurozone crisis reiterated this basic pattern, as France was able to gain concessions from Germany on institutional innovations for economic governance while Germany imposed and reimposed ever more stringently its economic policy model--which also meant France's abnegation of neo--Keynesian solutions. After the ESM came the `Europlus pact,' the `six--pack' and then the `fiscal compact,' agreed in December 2011, with 25 European member--states signing up outside the treaties (minus the British, who had vetoed the proposed treaty, and the Czech Republic), At the same time, Germany continued to resist proposals from the French among others for more ambitious initiatives more likely to end market uncertainties, such as much greater firepower for the various loan guarantee mechanisms, the pooling of member--state debt through Eurobonds, or using the ECB as a lender of last resort. Paradoxically, the current compromise between the two powers has been evaluated very differently by their European counterparts as well as their own national publics. Sarkozy's role in the crisis was seen in much more positive light than that of Merkel. Whereas Sarkozy was viewed as something of a `White Knight' riding to the rescue of Greece and Eurozone countries throughout Europe, Merkel was pictured as Europe's new `Iron Lady' outside Germany, imposing hardship on Greece as well as other European countries. At home, moreover, while the German public was highly critical of Merkel's successive agreements to the rescues, seeing them as a long succession of renunciations, the French public generally accepted Sarkozy's turn to austerity and the increasingly stringent `pacts' that accompanied it. So how do we explain these differential views of French and German leadership in the crisis, both outside and inside their countries? And why did the leaders respond so differently to the crisis? Part of the answer naturally requires setting these leaders in the context of long-- standing national economic and political traditions, considering their particular perceptions of national economic interest at the time of the crisis as well as of Political interest--related to 2
electoral considerations. But another important component has to do with the very structure of decision--making, with multiple actors at multiple levels. At the EU level, the main tension concerns the articulation between supranational and intergovernmental politics, and the ways in which the various actors have responded to events. The key supranational actors in the Eurozone governance architecture, the EU Commission, charged with oversight of Eurozone activity and member--state adherence to the SGP, and the European Central Bank (ECB), charged to maintain the stability of the euro, have naturally sought to carry out their respective duties while not only ensuring against threats to their prerogatives but also taking advantage of windows of opportunity that would enable them to help solve the crisis. Both institutional actors, however, are limited by the fact that major decisions about any significant change in the governance of the Eurozone can only be decided by the member states--and in particular France and Germany. As the major member-- state actors, however, France and Germany themselves have to take into account their previous "history--making" grand bargains at the EU level, including their "certain idea of Europe" (Parsons 2003) that led to the creation of the common currency.2 At the same time, though, they also have to deal with the responses of national publics and their own electoral prospects. The national level, in other words, is as important to any compromise solution as is the supranational. This suggests that Robert Putnam's (1988) classic discussion of the two--level game in international relations has great relevance for our case. What we will show, however, is that rather than seeing this as a two level game, in which the two levels remain largely separate, the EU's Eurozone negotiations are better viewed as a simultaneous double game. In this game, moreover, rather than using rational choice institutionalism to model the interest-- based calculations of `rational' state actors, we argue that a discursive institutionalist approach (Schmidt 2008) provides greater value--added to our understanding of how EU leaders perceived their interests as well as achieved compromises. Discursive institutionalism considers both the substantive content of ideas and the discursive interactions through which agents (re)construct and convey their ideas about interests and values in given institutional contexts on an on--going basis. These occur through a `coordinative discourse' with other (supranational) policymakers in leaders' efforts to reach agreement and in a `communicative discourse' with the public--both their own national publics and the European public more generally. Using this analytic framework, the paper seeks to demonstrate how and why President Nicolas Sarkozy was more successful legitimating the French position in his communicative discourse to the public than was Chancellor Angela Merkel with regard to the German position. It also seeks to show, however, that although Sarkozy may have won the public relations 3
battle, Merkel triumphed in the policy war, by imposing her vision of what was to be done economically in the context of the coordinative discourse among policymaking. To explain the latter, material factors and power relations also come into play. Most notably, not only was there a strong advocacy coalition countering France, including EU institutional players and the Northern European countries that were supporting the German position, but also, as France's competitiveness problems became increasingly apparent, even before it lost its triple A rating, its perceived weight in negotiations diminished, as the interaction was seen by both sides as less and less a match of equals. As a result, because Merkel stuck to her economic ideas but changed her discourse as she acquiesced to one French institutional policy solution after another, she lost the public but nevertheless imposed her austerity strategy on the rest of Europe. By the same token, because Sarkozy was consistent in his discourse even as he acquiesced to German economic policy ideas, he kept the public but gave up on his own strategy for growth. To elucidate all of this, the paper analyses the ideational `frames' of the two leaders while tracing their discursive interactions against changing background conditions since the European debt crisis was triggered by Greece in October 2009 until the most recent measures taken in 2012. The empirical analysis is based on a systematic corpus of Press conferences and media interviews by Nicolas Sarkozy and Angela Merkel after European summits. It is complemented by a number of press interviews (including some given by their respective Finance Ministers) and important speeches in that same period of time. EXPLAINING THE DYNAMICS OF AGREEMENT IN EU MULTI--LEVEL POLITICS A risky simultaneous double game As European integration has increasingly blurred the demarcation lines between domestic and foreign policy, the articulation between domestic politics and intergovernmental negotiations has become increasingly important for any understanding of governance and democracy in the EU. Paradoxically ­ partly because comparativists tend to concentrate on the former while international relations specialists deal with the latter ­ the processes of articulation remain under--researched and under--theorized with regard to EU integration. In the 1980s', R. Putnam put forward the famous metaphor of the two--level game (1988). His argument was that, while negotiating international treaties, national leaders have to seek agreement at two different tables, which implies different sets of preferences at the national level on one hand, and at the international level on the other. These two arenas are presumed to mutually influence each other, since the overlap of the two preference sets determines the 4
possibility of ratifying an agreement. The main implication is therefore that moves in international politics will mostly be brokered and ratified if they provide for domestic benefits. Other scholars have extended this analysis to the role of domestic politics in EU integration. Andrew Moravcsik (1997) put forward a liberal intergovernmentalist account of international relations in which states define their preferences on the basis of domestic society (or some subset thereof). With regard to the ideational variant of liberalism in particular, he suggests that State preferences stand for a national identity composed of views about the legitimate social order, i.e preferences about the scope of the nation (citizenship and borders), commitment to particular political institutions and ideas about the nature of redistribution (Moravcsik 1997). State behaviour understood as the management of international interdependence is then geared toward gains on the basis of these preferences. Building on this approach, German scholars have more recently claimed the "domestication", i.e a new orientation towards domestic societal preferences and identities, of the EU policy of Germany (Harnisch 2006) and France (Schild 2009). Here again, the central argument suggests a subordination of foreign policy to domestic preferences. Both approaches are useful in the sense that they point to crucial aspects of the articulation between domestic and EU politics. While the two--level game metaphor stresses the interactions between the two arenas, ideational liberal intergovernmentalism stresses the importance of societal preferences and long--established identities. However, both theories also have a serious drawback: they assume the existence of two separate realms of fixed preferences that interact with each other. Those preferences tend to be reified and pictured as homogeneous (especially in the liberal approach) and the formation of preference sets seems to happen at different moments. Moreover, both imply that international agreements are mainly geared towards the satisfaction of domestic preferences, hence the two--stage nature of the process. This is where the uniqueness of European politics must be taken into account. In the EU, we argue, the outcome of intergovernmental negotiations must be understood as a simultaneous double game, rather than a two--level game. The domestic and the EU spheres of preference formation do not interact with each other, they inter--penetrate each other. Preferences at national and EU level, are therefore co--constitutive. Democratic legitimacy results less and less from the preservation or reproduction of established national preferences, and more and more from the ability to re--configure and re--negotiate those preferences in the context of exacerbated interdependence. The "game" therefore should be understood less as the overlapping of preference sets and win solutions than as a discursive game of real--time deliberation and contestation. In today's EU, political leaders and decision--makers do not only have to address their national constituencies; they also need to speak to other European audiences in order to 5

convince them that the policy option they advocate is not the mere defence of a national
preference but serves the collective "good" of the EU as a whole. During the crisis of the
Eurozone, not just national leaders acting in their EU capacity but also national finance
ministers like the French Minister for economics, Christine Lagarde, and her German
counterpart, Wolfgang Schдuble, have sought to reach their neighbour constituencies with
interviews in the press. While the concept of public diplomacy, i.e communication with foreign
publics, first developed in connection with US foreign policy (Tuch 1990), the EU is arguably
the most fertile ground for analysing this kind of transnational communication. This is
especially true when issues are highly politicized and intensively reported by the media, as in
the case of the Eurocrisis.
Interdependence among the member countries in the EU has gone so far that
agreement is no longer an option: it has become a necessity. As a result, it is not just that the
possibility of an agreement is at stake ­ as in the two--level game theory ­ but also the electoral
fate of national leaders. If they prove to be unable to legitimize an agreement brokered at the
EU level, national leaders will have to bear the political costs of popular resentment. The
referenda for the ratification of EU treaties are the opposite of this. They represent a counter--
example to the simultaneous double game since they do feature a rigid two--step process where
treaties bargained in intergovernmental conferences are then submitted to popular consent.
This was the case of the rejection of the Constitutional treaty, which proved to have had
seriously detrimental effects for both national and European democracy. By contrast, in the
simultaneous double game of policy change in the EU, national elites have the crucial role of
bridging the gap between the management of interdependence and of national preferences
and identities.

How member--states have come to hold, maintain, and change their EU--related identities,
visions, and discourses depends in large measure on the interactive processes of discussion,
debate, deliberation, and contestation among and between elites and citizens over time.
National political elites, who simultaneously act as EU policymakers (henceforth termed
European elites), have played a key role in articulating visions of the EU that have had a major
influence on public perceptions, especially during the early years of the `permissive consensus'
up until the 1990s (see, e.g., Schmidt 2006). Since then, these elites' discourses often reflect as
they respond to the greater contestation coming from an increasingly `constraining dissensus'
(Hooghe and Marks 2009), in which divisions over the EU as well as, more generally, between
more open and closed views of Europe and citizenship have been growing (Kriesi, Grande et al.
2008). The media has also played a major role in `mediating' between elites and citizens, and in
particular in shaping public opinion on the EU through what and how they report and comment
on the EU (Koopmans and Statham 2010; Risse 2010). But how intellectual elites have debated
6
the EU also affect how both national publics and national elites more generally think about the EU (Lacroix and Nicolaпdis 2010) . social movements also play an increasingly significant role in influencing public opinion and leaders, in particular on issues of great political salience, whether across member--states as in the case of the mobilization against the Bolkestein directive (Crespy forthcoming) or within member--states in the cases of the French and Dutch referenda on the Constitutional Treaty (Laurent and Sauger 2005), WRR 2007) or of the Irish referendum on the Lisbon Treaty. European elites' discourses have also, naturally, been strongly influenced by past elites' ideas and commitments, whether because of the `rhetorical entrapment' engendered by previously accepted policy obligations (Schimmelfennig 2001) or the ideational trap resulting from the institutionalized ideas of their predecessors (Parsons 2003). A discursive institutionalist analysis To say that European elites may be constrained by past EU or national level discourses and actions, however, does not mean that they end up caught in the path--dependence of institutionalized ideas, as historical institutionalists might argue, locked into parroting the outcomes of the winning political coalition's expressed interests, as rational choice institutionalists might suggest, or even condemned to reproducing national cultural and identity frames, as sociological institutionalists could seem to suppose. European elites, in particular when it comes to supranational policy articulation and action, still have a certain degree of freedom of maneuver in the construction of their ideas and the articulation of their discourse. Certainly, their freedom is greatest when they are the ones to construct the founding ideas of a given discourse, as was the case for General Charles de Gaulle, Konrad Adenauer, Altiero Spinelli, and others. But subsequent leaders also have a modicum of choice, even if this must follow to some extent the flow of past ideas and discourse--if only to build legitimacy and ensure resonance for the public. The analytic framework used herein is `discursive institutionalism,' which analyzes the substantive content of ideas and the interactive processes of discourse in institutional context (Schmidt 2002; Schmidt 2006; Schmidt 2008). In European Studies, this approach is closest to the identity and discourse analyses of European studies (e.g., Jachtenfuchs 1998 et al.; Risse 2000; Diez 2001; Waever 2002; Larsen 1999). The difference is that it is more explicit about the need to focus on the dynamics of change in ideas through the interactive processes of discourse, and more concerned about situating these in formal institutional context (in addition to the ideational one). With regard to the EU, that context is a multi--level system consisting of a `coordinative' discourse of elite policy construction at the EU level and a `communicative' discourse between elites and the public involving national level policy discussion, contestation, and legitimization. Complicating this is the fact that policymakers can use an ostensibly 7
communicative discourse to their own general publics--in speeches or in interviews in national or the foreign press----to simultaneously signal their positions to fellow policymakers, ahead of coordinative negotiation meetings. By the same token, they may say one thing behind closed doors in the coordinative negotiations, something else to their national press as they emerge from their meetings, as a communication to their own constituencies. Legitimacy issues often arise when there is a significant lack of congruence between the coordinative discourse at EU level and the communicative discourse at the national level. This may come at the national level, as the press and opinion leaders may complain that national leaders have not been honest about the EU commitments they may have made, or at the EU level, as EU leaders may complain that a fellow leader has gone back on EU level promises in national speeches or actions. National institutional settings also represent both opportunities and constraints for political leaders when trying to persuade at home. These institutional settings can be stylized as `simple' polities in which decision--making tends to be channeled through a single authority, as in countries like France, which are unitary states with statist policymaking and majoritarian representation systems, or as `compound' polities in which decision--making tends to be more dispersed, as in Germany, which are federal states with corporatist policymaking and proportional representation systems (Schmidt 2006). In Germany, with its compound polity containing many veto players ­ in particular the Bundestag (lower house of Parliament) or the Bundesverfassungsgericht (the Constitutional Court) ­ the political system requires a `thick' coordinative discourse among the wide range of actors with a say in decision--making in order to reach agreement. In France, by contrast, with its simple polity in which top down decisions by a restricted governing elite are the rule, making for a `thin' coordinative discourse, communicative discourses to the general public are much more elaborate--and necessary, since disagreements generally turn into mediatized public debates and often also spill out into the street, if unions and social movements mobilize and protest. With these institutional issues in mind for the discursive interactions, we proceed in what follows to analyze why and how the French President was more successful in publicly legitimating his successive positions than Chancellor Merkel, who was trapped into a continual lack of congruence in the dynamic reconfiguration of coordinative and communicative discourses justifying the German strategy for the rescue of the Eurozone, but nonetheless succeeded in imposing it across Europe. In so doing, we also focus in on the substantive ideas of the two leaders, for which we use a frame analysis methodology. Drawing from various conceptualizations in different strands of the literature focusing on the role of ideas and discourse, the chapter explores three dimensions of public discourse about the Eurocrisis, focused on economics, institutions, and identity. In all three dimensions, we consider the cognitive and normative frames contained in EU leaders' discourse, which may 8
be conceived of in a number of different ways at different levels of generalization (see, e.g., Hall 1993; Marks and McAdam 1996; Sabatier 1998; Schmidt 2008; Mehta 2010). Putting these together, we identify three levels, including: 1) policy ideas related to policy measures and solutions, both economic (for instance the EFSF) and institutional (the budgetary "golden rule"); 2) programmatic ideas related to larger policy programs and paradigms (for instance, convergence or regulation); and 3) philosophical ideas related to deeply--held philosophies, norms and values (for instance, stability or solidarity). At whichever level of ideas, as just noted, we have to distinguish between frames connected to economic (e.g. set up of the EFSF) policy solutions and institutional policy solutions that should make common economic policy enforceable and sustainable (e.g. supervision by the EU Commission). We also, however, have to consider the identity frames of political leaders, to understand how they conceive of Europe and the position of their country in Europe. Here, attention will be paid to frames delineating boundaries between us (the French? The Europeans?) and them (the so--called PIGS? The speculators?) We begin the next section with a brief consideration of the longer term philosophical and programmatic ideas as well as discursive interactions in institutional contexts for both countries, before looking more deeply into the crisis itself. THE LONG ROAD TO ORDO--LIBERALISM Ordo--liberalism is a German invention. It is a form of neo--liberalism developed in the pre World War II years under the influence of the Austrian philosopher Friedrich von Hayek by `discursive coalitions' committed to having a state that was strong in its ability to ensure the framework conditions for competitive markets, but that would refrain from active intervention in the economy (Lehmbruch 2001). The ordo--liberal paradigm was forged in the 1950s under the leadership of Ludwig Erhard,3 with the philosophical ideas underlying the paradigm informing not just the Bundesbank but also, later, the ECB, which absorbed its ideology. The paradigm itself was developed by a discourse coalition led in the early post--war period by Alfred Mьller--Armack, the entrepreneurial actor who articulated the arguments that convinced policy actors, political actors, and then the public of the necessity and appropriateness of this idea (Lehmbruch 2001). It has remained a pervasive and distinctive form of neo--liberalism conceived as an alternative to Keynesianism that has also, to a certain extent, underpinned the German concept of social market economy (Ptak 2004). The German `social market economy' which emerged after much political struggle during the 1950s was a compromise accepted by conservatives and social democrats alike that consecrated a state that would govern the economy according to ordo--liberal economic principles while at the same time `enabling' corporatist management and labor coordination of wages and work conditions (Streeck 1997). 9
Postwar Germany, as a result, adopted a political economic philosophy and program that was the direct opposite of that of France's postwar dirigisme, in which an interventionist state was much more actively engaged in both macroeconomic steering and microecononic industrial policy. France's dirigiste political economic philosophy also began in the 1930s, as the brainchild of technocratic elites of the right and even, in some cases, of the far right who were influential during the last days of the Third Republic and the Vichy regime as well as the Liberation era (Nord 2010). In the postwar period, this produced an elite dominated, dirigiste approach to economic policymaking through Keynesian macroeconomics, planning in the early years, and industrial policy beginning with de Gaulle. Moreover, this pattern of state `voluntarism' has persisted, despite the fact that since the 1980s, postwar Keynesianism and state dirigisme gave way to neo--liberal reform in which the state engineered the `dirigiste' end of dirigisme through liberalization, privatization, and deregulation (Schmidt 1996; 2012). Nonetheless, the deep--seated idea of the legitimacy of strong state interventionism helps explain why a Conservative French President--who had embraced neo--liberalism for the previous two years of his mandate--would be ready to jump back in with a more state--led, Keynesian approach to the 2008 crisis. A very different set of deep--seated ideas about the value of the ordo--liberal `Culture of Stability,' which had continued largely unchanged since the early postwar period, helps explain why a Conservative German Chancellor would resist any such State action in response to the 2008 crisis. And this also helps explain Chancellor Merkel's resistance to President Sarkozy's push for more active and immediate response to the Greek crisis as of 2010. That resistance was founded also on very different analyses of the debt crisis itself. As we will demonstrate later below, Merkel framed the crisis as a failure of individual countries to solve their problems of competitiveness through timely budgetary and structural reform, so that she was determined that they should put their own houses in order first so as to enhance their competitiveness, before getting help if still necessary. For Sarkozy, the crisis was instead about the interdependence of the countries of the monetary union, the need for solidarity, and the imbalances resulting from the eurozone itself, split between surplus and deficit countries. During the 2008 to 2010 part of the crisis, moreover, French government officials, including Finance Minister Christine Lagarde, repeatedly focused, on the joint responsibility of deficit countries and surplus countries, and the need for the latter to consume more, raise wages, and the like, much to the reported irritation of Merkel. German leaders insisted that the problem was not their own hard--won competitiveness (gained through structural adjustments that led to ten years of no real wage growth in the 2000s), but rather about the public profligacy of deficit countries (forgetting that only Greece had this the problem--in Ireland and Spain the problem 10
was private sector profligacy, related to their respective housing bubbles, aided by the financing of French and German banks). It is important not to neglect, in this discursive analysis of the clash in ideas and discourse, the importance of underlying power relations. The authoritative nature of discourse depends to a large extent on the relative weight of the coalitions carrying the ideas. In the Eurozone crisis, the strongest advocacy coalition has been constituted by members of the European Central Bank, the IMF, the EU Commission, along with Germany and other Northern European countries, in particular the Netherlands and Finland, all promoting neo--liberal precepts of monetarist macroeconomic policy, budgetary austerity, and `structural reform.' The European Monetary Union (EMU) was itself the fruit of an earlier epistemic community of central bankers, economists, and financial reporters who convinced policymakers of the merits of EMU (Verdun 2000). Moreover, the austerity paradigm triumphed during the debt crisis because it was supported by a strong coalition that also included the most influential economists and the powerful European Central Bank (ECB). The ordo--liberal paradigm itself is at the very foundation of the ECB since its set up and tasks were famously inspired by the German Bundesbank. The ECB had been advocating fiscal reform and austerity ever since France and Germany had blatantly violated the budgetary rules entrenched in the Growth and Stability Pact in 2005. Because of the highly technical issues involved in the financial markets and the managing of State debt, the ECB has been the main actor detaining expertise and legitimacy for framing solutions to the crisis (Fontan 2011). In contrast, the Keynesian coalition has long been weak, having lost credibility first during the 1970s with its inability to solve the problems of stagflation stemming from the two oil shocks, and then adherents during the `Great Moderation,' with the seeming success of neo-- liberal and ordo--liberal policies (so long as one ignored the many crises).. In Germany, the economist P. Bofinger stands as an isolated Keynesian--minded economist within the German Council of Economic Experts that advises the German government and Parliament. German ideational path dependency during the current crisis, with the continued focus on price stability and fiscal discipline, is therefore not surprising. In France, orthodox Keynesian economists today are also few and far between when it comes to influencing government policy. They have been excluded from the mainstream and belong to minority left--wing academic circles. In 2010, four of these excluded economists4 published the "manifesto of appalled economists" (Le manifeste des economists atterrйs)5, a short book in which they objected to ten "wrong assumptions" about the functioning of the Eurozone. That said, this does not mean that the French economic intelligentsia have completely abandoned the interventionist tradition, including some close to the Elysйe6. At the same time that they may be advocates of austerity ­ and its enshrinement as a "golden rule" in the French Constitution ­ they are willing to promote 11
ad hoc proactive policy solutions while continuing to profile themselves as counsellors of the Prince7. This helps explain why the French, imbued with a `voluntarist' approach to policymaking, led by a President most concerned with playing a leadership role in the crisis, could also come up with new ideas that might not necessarily jibe with ordo--liberal orthodoxy. But the French were not the only ones willing to think `outside the box.' Although the ordo--liberal paradigm precludes any interventionist role of the ECB, this did not stop the bank from acting in pragmatic ways that took it significantly beyond its own charter, when it thought the euro in danger. In May 2010, at the height of the first Greek crisis, the bank boldly decided to buy governments bonds on the secondary markets through the Securities Markets Program--despite the fact that buying government debt is explicitly forbidden by the treaties (which the ECB got around by buying the debt not on the primary markets but on the secondary ones) (see Schmidt 2010). Because this can be regarded as a first step towards monetarization of State debt, a blatant violation of ordo--liberal orthodoxy--it did not go down well with the Bundesbank, which criticized the ECB's actions at various junctures, with Germany's representative on the board of the ECB, Jьrgen Stark, even resigning in muted protest. But while the ECB may have engaged in some unorthodox policy initiatives, including more recently the new ECB President Mario Draghi's launching of 3 year low--cost bank loans to inject liquidity into the system, it remains focused on its long--standing anti--inflationary and budgetary austerity policy goals, as a way to maintain its reputation and credibility (Fontan 2011). It has therefore encouraged the Eurozone's increasing turn to austerity through successive institutional mechanisms of oversight and sanctions, including the European Semester that gave the European Commission the authority to vet member--state governments' budgets even before these were reviewed by their national parliaments and the increasingly draconian fines and sanctions of the `six pack' and the `fiscal compact' agreed in December 2011, and to come into effect once ratified by twelve member--states. In other words, despite orthodox ordo--liberal philosophical and programmatic ideas, all actors have been open to pragmatic unorthodox policy ideas, in particular in response to existential threats. This points to the flexibility of `sentient' agents, neither fully trapped by narrowly calculated interests nor entirely blinded by path--dependent ideas or cultural frames, to change at least their policies, even if they remain committed to their overall program and its underlying philosophy. The problem for these actors is that any change in policies requires a legitimating communicative discourse to the public. And this is where Chancellor Merkel has had the greatest difficulty, since time and again she promised to reject any policies that would make Germans pay, but then, once she had capitulated, was left scrambling trying to find a legitimating discourse to defend her acquiescence to new policies that would make Germans pay. President Sarkozy had an easier time of it, since he appeared discursively consistent, 12
pushing for major policy initiatives, and able to claim success even when these were only partially agreed. The fact that he also agreed to ever more austerity also worked, in large part because this was likely to square with the preferences of his own conservative electorate. This takes us to the last point: European leaders' positions cannot be explained without also considering institutions and electoral politics, and in particular the extent to which, in this simultaneous double game, considerations other than those involved in solving the eurozone crisis, such as getting reelected or maintaining one's majority, play an important role. For example, the German leader's stance on the Greek bailout cannot be understood without also understanding the compound polity in which she operates, in which ministries such as that of Finance have considerable independence, in which the Bundesbank and the Constitutional Court in Karlsruhe are fully independent, and in which frequent regional elections can change the majority in the Bundesrat (second chamber). In Germany, the heated discussions about the first emergency measures for rescuing Greece took place in the run--up to the regional election in the significant region of North Rhine-- Westphalia (NRW). The government parties were going down in the polls and ended losing more than 10% of the votes compared to 2005. As result, the Chancellor's party, the CDU lost control of the Land, to the benefit of a red--green coalition. NRW was only the first in a series of election defeats. In March 2011, the CDU lost the rich Baden--Wьrttemberg, which had been a CDU's stronghold for 58 years. In the Bremen election in May 2011, the CDU lost over 5% of the votes while the SPD and the Greens were victoriously re--elected with enhanced scores. Notably, at least part of Merkel's problem in the run--up to the NRW election was the perception that she was indecisive, and subsequent to the bailout and loan guarantee agreement just prior to the election, that she had wrongly reversed her position. Moreover, her initial discourse, about `lazy Greeks' who needed to put their own house in order, while she was protecting German savings, made it very difficult for her to legitimate her switch in discourse, to then insist on national TV that `the future of Europe depended on it[the Euro]' and `it was essential to maintain the stability of the Euro'. The discourse rang hollow, while the turnabout angered numbers of her supporters, including the influential Frankfurter Allgemeine Zeitung. Part of the explanation for her increasing insistence on more stringent institutional mechanisms, automatically applied, also has to do with the attempt to demonstrate to a disenchanted electorate that their savings would be safe, and that the eurozone countries would become more and more like Germany. Sarkozy has none of the problems of the institutional and electoral problems of his German counterpart, given that France is a `simple' polity with tremendous concentration of power and authority in the president, which has only increased under his presidency as a result of constitutional reform. That said, the recent election campaign has politicized the eurozone crisis, as Sarkozy has sought to use it as a club against his opponent, claiming that the markets 13
would panic were Hollande to be elected. Notably, on April 16, for the first time, he broke the pact of silence over the ECB role agreed with Merkel and Monti in November 2011, claiming that the issue of ECB support for growth is "a question we cannot avoid" (Financial Times, April 16, 2012). All in all, as the crisis progressed, the French price for Germany's commitment to financial solidarity in the EU--through its agreement to successive bail--outs and loan guarantees--was a significant strengthening of the ordo--liberal foundation of economic policy and governance in the EU. This began first in 2010, as the French activated solidarity, by making Germany, as the largest economy and therefore the proportionately largest contributor to any bailout or loan guarantee, agree to pay. It continued in 2011 as the Germans, having agreed to pay, pushed increasingly for convergence of all eurozone economies to German Ordnungspolitik (ordo--liberalism). ACTIVATING SOLIDARITY: MAKING THE GERMANS PAY In 2010, during the first phase of the Eurozone crisis, discussions were geared towards reaching agreement over policy instruments to respond to the Greek debt crisis. The conversations began in January 2010, as the skyrocketing Greek debt fueled a debate among European leaders regarding a common response to the crisis and the need for new mechanisms for the Eurozone. They ended in December 2010 when the ESM was adopted as a permanent financial solidarity instrument in the EU, to start in 2013. During the first months of 2010, despite an increasing sense of urgency, as the Greek crisis worsened, inertia set in. While Nicolas Sarkozy tried to convince Angela Merkel that a large scale financial plan was essential for the rescue of Greece, the Chancellor was unmovable, making it clear that she was unwilling to put German taxpayers' money into any form of European financial mechanism. In the interim, and despite the fact that EU leaders eventually agreed to a 22bn euro safety net in March and the possibility of emergency loans in April, the Greek deficit rose to an unsustainable 13.6% of GDP. Only at the seemingly very last minute was an agreement reached to grant a 110bn euro bail out for Greece on May 3. And when this failed to stem the risks of contagion to other member--states, in particular Ireland, Portugal, and Spain, the EFSF was created over the following weekend, accompanied by agreement to impose budgetary austerity across the EU (and not just the Eurozone). The price of the agreement was a French shift towards austerity policy in order to strengthen ­ rather than question -- the monetarist foundation of EMU. The measures in May 2010, meant to `shock and awe' the markets, as EU leaders declared at the time (Financial Times May 9, 2010), provided only a few weeks of respite before the markets started worrying instead about growth. Later, the discussions around the 14
creation of the ESM as a permanent bailout fund, agreed to by a treaty--demanded by the German government concerned that the German Constitutional Court would not accept the conversion of the temporary bailout facility into such a permanent fund because it had been established outside the regular treaty system (the EFSF was made up of multiple bilateral agreements to get around the unanimity rule for treaties)--were themselves the cause of growing attacks on Ireland by the markets, largely because those discussions had raised the specter of bank `haircuts,' (despite the fact that these would only apply to loans under the ESM due to start in 2013, not to the EFSF). Ireland succumbed to these attacks in December that same year, receiving a 85 bn euro bail out from the EFSF; Portugal succumbed the following spring. Two substantive dimensions of discourse were particularly salient during 2010. First, the need to reach agreement on the policy solutions put the differing underlying economic philosophies and programmatic ideas guiding French and German economic policy on a collision course. In this instance, ordo--liberalism was strengthened as France adopted the austerity and competitiveness frame. Second, the discourse also contained a strong moral dimension, with the French evoking solidarity, the Germans stability. Identity frames, moreover, show that Sarkozy and Merkel had diverging ideas and discourses on who was responsible for the crisis and who were the protagonists who might provide for solutions. Policy solutions and paradigms : Convergence towards German Ordnungspolitik In the course of 2010, France and Germany eventually agree to set up two financial instruments: the EFSF with the first Greek bail in May, and then in the fall, the ESM. With both, German leaders kept insisting, both in the coordinative discourse with their European partners and in the communicative discourse to the German public, that they would not agree to such funds, until they did. At a press conference in the fall (on September 16, 2010), for example, both Merkel and her Finance Minister, Wolfgang Schдuble, maintained that they would not agree to any extension of the EFSF to a permanent fund. By December of that same year, they agreed to the EMS at the EU level. What is clear is that Germany mainly followed France with regard to policy solutions-- albeit reluctantly, and with much delay. This comes out clearly from a systematic analysis of the press conferences and press interviews of Merkel and Sarkozy for the year. Graph 1 demonstrates that whereas French leaders advocated establishing not only the two funds but also such solutions as Eurobonds or enhanced budgetary oversight, Angela Merkel was stuck on already existing, but inefficient, policy solutions such as respecting the rules enshrined in the Stability and Growth Pact or even investing in research contained in the Lisbon strategy. At the this same time, all the think--tanks were abuzz with discussions of how to create a European 15
Monetary Fund or to make Eurobonds work, while major economists, opinion makers, and even government officials, including Schдuble himself, published op--eds in major newspapers on various mechanisms for financial solidarity. But none of this had an impact on Germany's position. Graph 1 : Economic policy solutions 2010
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France
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Germany
Graph 2 shows a similar pattern with regard to institutional solutions. Although Germany finally embraced France's long--standing demand for `gouvernance йconomique,' that is, for an economic government that would oversee the Eurozone, it did so on condition that this meant strengthening the sanctioning mechanisms for the countries that would not be able to abide by the budgetary rules. The French went along with this with some reluctance, in particular because these were increasingly focused on automatic financial sanctions (see the French President's Press conference on March 25, 2010). Moreover, Merkel repeatedly evoked the idea that the existing treaties prevented bails out in the Eurozone. And finally, once the bailout and loan guarantee had been agreed, Angela Merkel missed few opportunities to remind her European partners of her country's decision to anchor a budgetary `Golden Rule' (Schuldenbremse, literally debt brake) in the German Constitution (PC 10.05.2010, Le Monde 19.05.2010). Graph 2: Institutional policy solutions
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France
0 Germany
16
Graph 3 suggests that part of the reason for the seemingly interminable discussions over the exact conditions for the Greek bail out can be further explained by the fact that Sarkozy and Merkel focused on different underlying policy paradigms for the ESFS and the EMS. Whereas the French leaders' discourse continued to highlight the importance of the economic convergence of member--states, in keeping with the original ideas behind the European Monetary Union, German leaders used the key words of the ordo--liberal frame, austerity and competitiveness, while adding conditionality as the way in which to ensure that member--states with excessive debts commit themselves to austerity budgets to reduce public deficits, under the supervision of the EU authorities. The leitmotiv of the German political establishment's discourse was control over public finance, as signaled by the use of a wide range of terms, all expressing this idea in the German language ­ Haushaltsdiziplin, Haushaltskonsolidierung, Defizitkontrolle, Sparkurs, etc8. These terms, moreover, are all closely associated with the concept of competitiveness, which was over--used in every speech of the German Chancellor, as in the following quote: "As a matter of fact, and this has been acknowledged everywhere, the competitiveness of the various Euro--countries is different, and we are helping ourselves to become the most competitive regions in the world if we pay attention to the strengthening and the improvement of our overall competitiveness. We need to be careful that it does not lead to excessive divergences within the Eurozone, but rather that we grow together thanks to better competitiveness" (PC 04.02.2011). Moreover, although the Pact adopted in March 2010 was named the `Pact for the Euro,' the Germans often referred to it as the `Pact for Competitiveness' (PC 04.02.2011, PC 11.03.2011). And subsequent to the May agreement, Merkel implicitly linked the push for zero deficit to increased competitiveness, while she strongly associated the `solidity' of public finances with austerity measures across Europe (Le Monde 19.05.2010). Graph 3: Programs and paradigms 2010
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France
5 Germany 0
17
Notably, with the May agreement on the Greek bailout and the EFSF, the French President embraced to a large extent the ordo--liberal framing of the crisis. That said, Sarkozy nonetheless endeavoured to maintain a discursive balance between the invocation of austerity, on one hand, and of growth and employment, to the other hand. By contrast, the German discourse had no place at all for the main French alternative frame, that of a necessary policy convergence within the Eurozone. Norms, values and identity frames: crime and punishment vs solidarity While the cognitive arguments in the German and French leaders' discourse were reasonably well--developed, the normative arguments were strikingly thin, with scant reference to values, especially as far as Germany was concerned. Whereas French leaders repeatedly talked of solidarity, the best German leaders could come up with was `stability,' as Graph 4 demonstrates. Graph 4: Norms and values 2010
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France
0 Germany
The main discursive frame used by the German Chancellor was that of stability. It served as a master frame encompassing more specific discursive elements at the level of paradigms (austerity) and policy solutions (Golden rule, sanctions, the Stability and Growth Pact, etc). Stability itself is a traditional frame inherited from the monetarist spirit of the Maastricht Treaty, for which the core task of the ECB is to ensure price stability (low inflation) while the rules for EMU are enshrined in the Pact of Stability and Growth. As J.C. Juncker recalled, the value of a stable currency is deeply anchored in the German collective memory: "Ordnungspolitik is not austerity, it is a principled approach that grew out of the historical experience of the double total destruction of the people's wealth, that we should not mock but, for those like me who know and like Germany, that we always need to explain to those who know this country less and also maybe like it less than I do." (PC 04.03.2011). 18

For the Germany, in other words, stability of the currency has been elevated to a moral value, as
a result of history and collective memory.
The German Chancellor's value--based discourse on stability stands in contrast to the
French President's emphasis on solidarity, in particular towards Greece and, more generally,
within the Eurozone, as the main justification for setting up the EFSF and the EMS. Sarkozy also
appealed to the grand narrative of EU integration: "The Euro is Europe, Europe means peace on
the continent" (PC 08.05.2010). In stressing the principle of solidarity, the French banking
interests that were to benefit most from a bailout for Greece9 were discursively absent from the
construction of the French position, which helped make it more legitimate. This was also, one
might add, true for the German discourse, in which citizens' interests were at the forefront of the
discourse, as the German government insisted time and again that it was most concerned about
engaging the German taxpayers' responsibility in the financial rescue of Greece. Indeed, the idea
of solidarity remains marginal in the German discourse and, when mentioned, it is always
associated with responsibility and stability. On the one hand, as the largest and economically
most significant member of the Eurozone, German leaders made clear that they felt responsible
for the survival of the common currency. On the other hand, they were equally clear about the
fact that the PIGS also had to commit themselves to policies that would allow for stabilizing the
common currency. In Angela Merkel's words, "stability and solidarity are two sides of the same
coin" (PC 26.03.10).
The most salient normative dimension here involves the different assignation of
responsibility. This can be scrutinized through identity frames, i.e. the discursive references to
actors depicted as protagonists ("us") or antagonists ("them") in the crisis, as shown in Graph 5.
In the first months of 2010, the French President mainly put the blame on "the markets" while
pointing to speculators as common enemies for the Eurozone: "it is logical that a member
country of the Euro that is being attacked by speculators, as it is the case of Greece today, should
be able to rely on the solidarity of other members of the Eurozone. Otherwise, why did we
decide to have a common currency?" (PC 03.03.10). He pressured the German Chancellor while
instrumentally appealing to her European commitment: "I believe in the European solidarity of
Germany, I believe in Mrs Merkel's European commitment" (CP 07.03.2010). This is where
Nicolas Sarkozy most clearly manages to profile himself as the `White Knight' rescuing Greece.

Graph 5: Antagonists 2010
30 20

10
France Germany
0
PIGS Speculators
19

In contrast, Angela Merkel played the `Iron Lady,' first stressing the lax budgetary policies of the PIGS as she insisted in a joint press conference early on in the crisis that: "Greece won't be left alone, but there are rules and these rules must be adhered to," (Washington Post February 12, 2010). In March, she directly countered Sarkozy's insistence that speculators were the problem, saying: "I would suggest that we should not assume that the situation was only caused by mean speculators (...) If the budget situation in Greece had not been what it was, the speculators would have not had such a chance. This is actually something that should not have taken place after the Treaty of Maastricht" (PC 26.03.10). The underlying idea among the German establishment and public was that the Greeks should be punished for cheating and then lying about the state of the country's public finances. This position echoed the German public's hostile stand on what was then seen as the "Greek crisis". In February--March 2010, numerous opinion polls showed that about two thirds of German citizens opposed the idea of the federal government committing itself to financial help10. In the same vein, the French and the German leaders disagree with regard to the main protagonists in the crisis. For Nicolas Sarkozy, the PIGS countries were to be seen as allies, while integration was to be re--directed towards further convergence of a core Europe embodied by the Eurozone countries and led by intergovernmental institutions such as the Council of Ministers and the European Council and its permanent President. Graph 6: Protagonists 2010
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0 Germany
For the German Chancellor, in contrast, the banks were to be seen as allies rather than enemies. In the first sequence of the crisis, Angela Merkel also resisted the vision of a core Europe and insisted on moving forward with the 27 member states of the EU as a whole; she consistently referred to the leading role of the supranational institutions; the ECB, the EU Commission and the Court of Justice. Furthermore, was Nicolas Sarkozy was objecting the 20
involvement of the IMF in the beginning, Angela Merkel insisted that a substantial part of the financial burden would be shared with the involvement of the IMF. The discrepancy between the French and the German discourses during the Eurocrisis was further reinforced by two contrasted political styles also insofar as domestic politics were concerned. Whereas the German Chancellor was often criticized for being too cautious, undecided and not having firm convictions on a number of issues, N. Sarkozy endeavored to embody voluntarism and the struggle against political inertia, which often led him to impulsive action. The main French framing of the crisis was clearly geared towards the unity of Europe with two salient ideas: solidarity and convergence. In contrast, the German discourse was quite poor in its normative dimension towards the outside, while mainly stressing the need for everyone to abide by collective rules for ensuring the stability of the common currency. While Nicolas Sarkozy was quite clever in concealing the major French interests involved, Angela Merkel's reluctance to react to the crisis was clearly related to public opinion in a specific electoral context. In this respect, she had to suffer a discrepancy between the communicative discourse directed to the domestic public and the necessary concessions in her coordinative discourse with European partners, leading to suboptimal policy solutions. CONSTITUTIONALIZING AUSTERITY: THE GERMAN MODEL PREVAILS After agreement on new financial instruments allowing for the bail out of the Greek and Irish debt in 2010, the year 2011 was dedicated to the institutional consolidation of this new step towards integration within the Eurozone. In March 2011, the members of the Eurozone plus six additional EU countries adopted the Europlus Pact, which was to foster competitiveness and employment as well as to ensure the sustainability of public finances and financial stability. Besides a number of policy instruments focused on improving competitiveness (notably the monitoring and adjustment of wages), the Pact committed the member countries to the introduction of a German inspired "debt brake" ensuring fiscal discipline into their national primary law. In December 2011, a further step was taken towards the constitutionalization of budgetary discipline with the agreement on an intergovernmental fiscal Treaty foreseeing the adoption of balanced budgets and the enforcement of an excessive debt procedure monitored by THE COMMISSION and the CJEU. While Germany had proved reluctant with regard to further European commitments, it sought to ensure that financial solidarity agreed in the previous year was accompanied by common rules for all member states that reflect the German model of sound public finances and competitiveness based on wage moderation. After giving in on financial solidarity in 2010, the German Chancellor was able to demonstrate to the German public that the country had successfully promote its 21
virtuous model on the European stage. Merkel was less successful in engineering greater institutional balance While the intergovernmental treaty and the enhancement of the Eurozone leaders' summit definitely strengthened governance on an intergovernmental basis, she continued to push for the involvement of the Commission and the Court in the supervision of the new budgetary rules. Policy solutions and paradigms: convergence towards the competitiveness frame In the sequence of institutional consolidation in 2011, the respective French and German discourses on policy solutions did not change much. The German Chancellor, while fully endorsing the ESFS and the EMS, developed a complex set of arguments to explain how they might function together. She also continued to refer to the stability and growth pact and the need to invest in research in order to boost competitiveness. On the French side, Nicolas Sarkozy moved on to the advocacy of fiscal integration (10 occurrences), in particular with regard to tax competition, an idea that was followed more or less by Angela Merkel (5 occurrences). By contrast, discourse on the institutional policy solutions changed markedly in 2011. The issue of automatic sanctions was more salient in the French discourse because Nicolas Sarkozy had to justify his consent to automatic sanctioning mechanisms as well as the role of the EU Commission in the monitoring of the excessive deficit procedure. In addition, he very often mentioned the role of the new economic government of the Eurozone in order to stress that the long--standing French demand was satisfied in the course of Franco--German negotiations. This theme remained marginal for the German Chancellor. Graph 7: Economic policy solution 2011
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The newest, most salient theme in this sequence of the crisis was the "golden rule" for budgetary discipline. Both France and Germany converged on this theme, as well as on the idea of enshrining it in a new intergovernmental treaty. While this mechanism was inspired by Germany, Nicolas Sarkozy had already advocated introducing it in the French Constitution since early 2010. Polls showed that the French President had been quite successful in 22
communicating the new orientation towards austerity to the French electors. In August 2011, a poll confirmed that a majority of the French approved the introduction of the "golden rule" into the French Constitution11. This constituted a clever discursive strategy by French political leaders. On one hand, they strongly converged towards the competitiveness program and framing. In February 2011, Christine Lagarde, who was the French Minister for Finance at that time, gave an interview to the Spiegel seeking to persuade the German political establishment and public of the French commitment to increasing competitiveness (11 occurrences) and stability (4 occurrences). On the other hand, as Graph 8 demonstrates, besides competitiveness, Nicolas Sarkozy avoided the austerity frame and put the emphasis on the idea of policy convergence within the Eurozone, which was in tune with the French vision of a core Europe. He also talked more about growth, employment and the regulation of finance as complementary references to Keynesian policy. In contrast, Angela Merkel used competitiveness, along with austerity, as her main discursive frames, with convergence, growth and employment and conditionality as secondary frames. Regulation was absent from her discourse in this period of time. Graph 8: Policy programs and paradigms 2011
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By the end of the period under study, however, President Sarkozy was more willing to see convergence rather than competitiveness as the main goal of the Pact for the Euro. The framing discrepancy was acknowledged by the French President: "We have also changed the name, it is `Pact for the Euro in favor of competitiveness and convergence'. This allowed us to put an end to the debate between those who were for convergence and those who were for competitiveness" (PC 11.03.2011) Meanwhile, the competitiveness frame also permeated the French discourse to a significant extent (cf. Christine Lagarde in Spiegel 14.02.2011). The main French achievement in terms of convergence was the setting up of the so-- called economic government of the EU, a gathering of the Eurozone leaders. While the Germans 23
were stressing convergence in terms of wages (with the end of indexation on inflation12), Sarkozy emphasized a move that France had advocated for a long time, namely integration in fiscal policy with first steps towards harmonization. Norms, values and identity frames: the stability of the Eurozone The normative discourse and the appeal to values became even thinner in 2011 compared to 2010. While Nicolas Sarkozy still referred ­ although less often ­ to solidarity, the most salient frame in this respect was the idea of stability, which had long been most salient in the German discourse, as Graph 9 shows. The stability of the common currency had by now become the main normative guiding principle. Interestingly, Angela Merkel also referred to the German concept of Wohlstand as a secondary frame, i.e. the underlying idea of the German post--war economic miracle, making clear that what was really at stake with the Eurocrisis for the Germans was a threat to their standards of living and well--being. While this frame might have been quite efficient in the communicative discourse directed at the German domestic constituency, it naturally could not work as a legitimizing discourse at the European level. Graph 9: Norms and values 2011
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10 5
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The norm of stability was consistent with a framing of collective identities that focused on the Eurozone, in particular with regard to the view of antagonists and protagonists in the crisis. First, the UK appeared as the main antagonist because of its veto and then refusal to adopt the Euro Plus Pact and the intergovernmental treaty; this was equally highlighted in both the French and German discourses (4 occurrences for both leaders). More interestingly, the gap between the French and the German framing of protagonists had closed to a significant extent when compared to 2010 (see Graph 10). Nicolas Sarkozy still emphasized the French-- German axis as a main protagonist more often than Angela Merkel, but the latter mentioned the Eurozone ­ as opposed to the EU 27 ­ and intergovernmental institutions more often than she had in the previous year. This accounts for a relative convergence towards the new intergovernmental governance mechanisms advocated by France in the Eurozone. In turn, the 24
Commission and the ECB became much more salient in the French discourse than the intergovernmental institutions. Similarly, the discursive patterns converged with regard to the role of the IMF and the banks as allies for the Eurozone countries in the crisis. Graph 10: Protagonists of the crisis 2011
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CONCLUSION In the complex set of discursive interactions that defined the Franco--German partnership in 2010 and 2011 during the Eurozone crisis, there was a lot of give and take on both sides. However, if we were to be pushed to make a final assessment of the exercise, we would conclude that Germany, for all the criticism of Chancellor Merkel as the `Iron Lady' unwilling to take action in solidarity with Eurozone members under pressure from the markets, won out over Sarkozy, as the `White Knight' ready to ride out in defence of the weaker member--states. This comes our clearly in the final table (see Table 1), when we consider how much of the German discourse on policy ideas and solutions, programmatic ideas and paradigms, and principles and values was taken up by the French leadership. The fact that this discourse has supported austerity policies across Europe and, indeed, has locked European leaders into maintaining such policies for fear of a loss of credibility with the markets and of electoral support from their domestic constituencies, has had serious economic consequences. Eurozone economies have slowed, while the PIGS have been sliding into recession. It is true that growth has now become a new buzzword, with newly appointed Prime Minister Monti of Italy having launched the discussion. But with austerity budgets linked to rapid deficit reduction the only game in town, one wonders how European leaders expect to promote growth, and where the money will come from, given the continued resistance by Chancellor Merkel to real financial solidarity, through Eurobonds, using the ECB as a lender of last resort, or even increasing the firepower of the loan guarantee mechanisms. It may very well be that only a change in leaders and parties, with a move from conservative to social democratic politics, will allow for a change in discourse and action. But this would mean 25

that the social democrats would also have to develop new ideas and discourse capable of
changing the minds of the markets, by now fixed on stability and growth--an impossible
combination.

Table 1 Discursive differences between France and Germany
Policy ideas: Economic policy solutions
FRANCE Greek bail out EFSF + EMS Fiscal harmonization EBC last resort (debt monetization) Fiscal harmonization
Policy Ideas: Institutional policy solutions Programmatic Ideas: Programs and paradigms Philosophical Ideas: Principles, norms, values Antagonists Protagonists
Gouvernement йconomique Convergence Growth & employment Regulation Solidarity Peace The markets/speculators UK The Eurozone The French--German axis Intergovernmental institutions PIGS
GERMANY Sanctions IMF involvement Private sector involvement Investment in research Golden rule Competitiveness Conditionality Growth & employment Stability Responsibility Wohlstand PIGS UK Supranational institutions IMF The banks


26
REFERENCES Costa, O. and P. Magnette, Eds. (2007). Une Europe des йlites ? Rйflexions sur la fracture dйmocratique de l'Union europйenne. Bruxelles, Editions de l'Universitй libre de Bruxelles. Crespy, A. (forthcoming). Qui a peur de Bolkestein? Conflit et dйmocratie europйenne. Paris, Economica. Deubner, C. (2001) "Mieux gouverner la zone euro. Le fragile compromis franco--allemand." Notes du Cerfa Volume, DOI: Diez, T. (2001) Europe as a Discursive Battleground: European Integration Studies and Discourse Analysi', Cooperation and Conflict 36(1), pp. 5--38 Fontan, C. (2011). Managing change with ideas: the ECB's political game in the EMU during the crisis. Congrиs des associations francophones de science politique. Brussels. Hall, P. A. (1993). "Policy Paradigm, Social Learning and the State : The Case of Economic Policy in Britain " Comparative Politics 25(3): 275-- 296. Harnisch, S. (2006). Internationale Politk un Verfassung. Die Domestizierung der deutschen Socherheits-- und Europapolitik. Wiesbaden, VS Verlag fьr Sozialwissenschaften. Hooghe, L. and G. Marks (2009). "A Postfunctionalist Theory of European Integration: From Permissive Consensus to Constraining Dissensus." British Journal of Political Science 39(1): 1--24. Koopmans, R. and M. Statham, Eds. (2010). The Making of a European Public Sphere. Cambridge, Cambridge University Press. Kriesi, H., E. Grande, et al. (2008). West European Politics in the Age of Globalization Cambridge, Cambridge University Press. Jachtenfuchs, M., Diez, T. and Jung, S. (1998) Which Europe? Conflicting Models of a Legitimate European Political Order, European Journal of International Relations 4 (4), pp. 409--445. Lacroix, J. and K. Nicolaпdis, Eds. (2010). European Stories. Intellectual Debates on Europe in National Contexts. Oxford University Press, Oxford University Press. Larsen, H. (1999) British and Danish European Politics in the 1990s: A Discourse Approach, European Journal of International Relations 5 (4), pp. 451--83. Laurent, A. and N. Sauger (2005). Le referendum de ratification du Traitй constitutionnel europйen: Comprendre le `non' franзais Les Cahiers du Cevipof. Lehmbruch, G., 2001. "Institutional Embedding of Market Economies: The German Model and its Impact on Japan." In W Streeck and K Yamamura, eds., The Origins of Nonliberal Capitalism: Germany and Japan in Comparison. Ithaca: Cornell Univ. Press Marks, G. and D. McAdam (1996). "Social Movements and the Changing Structure of Political Opportunity in the European Union." West European Politics 19(2): 249--278. Mehta, J. (2010). The Varied Role of Ideas in Politics: From "Whether" to "How". Ideas and Politics in Social Science Research. R. H. Cox and D. Bйland. Oxford, Oxford University Press: 23--46. Moravcsik, A. (1997). "Taking Preferences Seriously: A Liberal Theory of International Politics." International Organization 51(4): 513--553. Parsons (2003). A certain idea of Europe. Ithaca, Cornell Univesity Press. Parsons, C. (2003). A certain idea of Europe. Ithaca, Cornell University Press. Ptak, R. (2004). Vom Ordoliberalismus zur Sozialen Marktwirtschaft: Stationen des Neoliberalismus in Deutschland. Baden--Baden, VS Verlag fьr Sozialwissenschaften. Putnam, R. (1988). "Diplomacy and Domestic Politics: The Logic of Two--Level Game." International Organization 42(3): 427--460. Risse, T. (2010). A Community of Europeans? Transnational identities and Public Spheres. Ithaca & New York, Cornell University Press. Risse, T. (2000) "Let's Argue!" communicative action in World Politics, International Organization 54 (1), pp. 1--39. Sabatier, P. A. (1998). "The advocacy coalition framework: revisions and relevance for Europe." Journal of European Public Policy 5(1): 98--130. 27
Scharpf, F. (1999). Governing in Europe. Effective and democratic? New York, Oxford University Press. Schild, J. (2009). Die "Domestizierung" franzцsischer Europapolitk. Frankreich jahrbuch 2008. D.--F. Institut. Wiesbaden, VS Verlag fьr Sozialwissenschaften. Schimmelfennig, F. (2001). "The Community trap: Liberal norms, rhetorical action, and the Eastern enlargement of the European Union." International Organization 55(1): 47--80. Schmidt, V. A. (1997) From State to Market? The Transformation of French Business and Government Cambridge, UK: Cambridge University Press. Schmidt, V. A. (2002). The Futures of European Capitalism. Oxford, Oxford University Press. Schmidt, V. A. (2006). Democracy in Europe. The EU and National Polities. Oxford & New York, Oxford University Press. Schmidt, V. A. (2008). "Discursive institutionalism: The Explanatory Power of Ideas and Discourse." Annual Review of Political Science 11: 303--326. Schmidt, V. A. (2012)."European Member--State Elites' Diverging Visions of the European Union: Diverging Differently Since the Eurozone Crisis and the Libyan Intervention?" Journal of European Integration, vol. 34, no. 2: 169--180 (Streeck 1997) Tuch, H. N. (1990). Communicating with the World: U. S. Public Diplomacy Overseas. Basingstoke, Palgrave Macmillan. Wжver, O. (2002) Identity, Communities and Foreign Policy. Discourse Analysis as Foreign Policy Theory, in: L. Hansen and O. Wжver (eds.), European Integration and National Identity. The Challenge of the Nordic States (London: Routledge). Endnotes: 1 The acronym stands for Portugal, Italy, Greece and Spain, i.e. the countries that are considered as problematic EU member states because of their high level of public debt and weak competitiveness. 2 Naturally, other EU leaders present around the table are also important, to propose, mediate, promote compromise, or to oppose. But they ordinarily line up behind one or the other major player, with the Northern Europeans largely behind Germany as the crisis unfolded, the Southern Europeans behind France.. And if Germany and France cannot agree, then there is no agreement. 3 L. Erhard was Minister for Economics from 1949 to 1963 and Chancellor from 1963 to 1966. 4 Philippe Azkenazy, research director at the French National Center for Scientific Research (CNRS); Philippe Coutrot, expert in statistics, activist at Attac and at the alterglobalist think tank Fondation Copernic; Andrй Orlйans, research director at the French National Center for Scientific Research, and Henri Sterdyniak, research fellow at the Office franзais des conjonctures йconomiques (OFCE). 5 http://atterres.org/ 6 In 2009, Xavier Musca, former Chief of the French treasury and close friend of N. Sarkozy, was appointed general secretary of the Elysйe. X. Musca, who took part in the negotiations of the Maastricht Treaty with J.--C. Trichet as a mentor and is very well known and appreciated among the German finance establishment. He has been the architect of the French counter-- crisis policy for four years with the balance of public finances as a central objective. However, embracing budgetary discipline policy does not mean for France to go completely off the path dependency of interventionism. 7 This can for instance refer to J. P. Fitoussi and P. Weil, respectively former President and President of the office franзais des conjonctures йconomiques (OFCE), a research unit that has long played a major role in the public debate. 8 Just as the French term « rigueur » is avoided to refer to austerity measures because of its political negative connotation, Konsolidierung is prefered to Sparkurs in the German discourse. 9 French banks are massively involved in Greece through the acquisitions of Greek proximity banks, up to 79 bn versus 43 bn for German banks. More generally, French banks are very involved in Southern European markets, including in Spain and Portugal. Cf Elie Cohen, « Grиce : nuages noirs sur les banques franзaises », Telos, 02.05.2010, http://www.telos-- eu.com/fr/article/grece_nuages_noirs_sur_les_banques_francaises (12.05.2011) 10 http://de.statista.com/statistik/daten/studie/77453/umfrage/finanzielle--hilfen--der--bundesregierung--fuer--griechenland/, February 2010. "Bьrger stьtzen harten Kurs gegen Griechenland", www.stern.de, 30.03.2010. 11 "Sondage: plus d'un franзais sur deux approuve la Rиgle d'or", 25.08.2011, www.lepoint.fr (20.03.2012) 12 Here, one should note that the end of wage indexation on inflation had already been implemented for a few years in France. 28

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