France's facade begins to crumble: Germany now calls the shots in Europe, a fact that the French are loath to accept, says Jonathan Eyal

LAST THURSDAY was 'a very ordinary day', according to Edouard Balladur, the French prime minister. Next to Marie Antoinette, this would surely rank as one of history's greatest understatements, for no amount of sang-froid can now hide the true magnitude of France's dilemmas. At stake are not only currency arrangements; after playing for high stakes throughout the decades of the Cold War, the country's European chips are now also being called in.

The entire edifice of France's European policy depended on two major assumptions. The first was unspoken, but well understood: Paris put its faith in a Community that, despite its claims to talk on behalf of 'Europe', represented only 12 states on the western tip of the continent. Furthermore, the EC was driven by France and Germany, under the explicit understanding that both were equal.

This arrangement allowed Germany to become an economic giant without disrupting European security, while France still pretended that its old glory was untarnished. Bonn had the money, but Paris had the nuclear weapons and a vision in which every French national interest could be portrayed as Europe's imperative.

There is no question that the Franco-German axis served all Europeans well. But Paris committed a grievous mistake in assuming that it was immutable. After the collapse of Communism, both President Mitterrand and Chancellor Kohl pretended that nothing had changed: Bonn mouthed meaningless generalities about 'German union in European union', while Mitterrand still believed that a greater Germany could be contained within a French-dominated Community. It was an exercise in futility.

Germany's deliberately self-effacing international role has turned out to be transitory, confined only to those German politicians still scarred by the last war. A new generation of leaders cannot accept that Germans should be treated as potential delinquents. France should have focused on accommodating a new Germany into a new and enlarged EC. Yet exactly the opposite happened: France tried to force the new Germany into its old political agenda.

The entire mad dash to ratify the Maastricht treaty, with its strict timetable for monetary union, was predicated on France's belief that only by erasing the mark would Germany be deprived of its ability to translate economic power into political influence. On behalf of this dream, everything had to be sacrificed: eastern Europe had to remain in suspended animation, poorer EC countries could be discarded, Nato could be dissolved and a trade war unleashed with the US and Japan. For the French, 'Europe' had only the 'destiny' conceived in Paris, or was doomed to collapse.

Much of this nonsense was hidden by the fact that Chancellor Kohl initially went along with this enterprise. Yet the French agenda now frequently runs against Germany's natural interests. Unlike France, Germany cannot simply ignore turmoil on its doorstep in eastern Europe. And unlike Paris, Bonn is not prepared to countenance a trade war simply because the French believe that it could forge Europe's identity.

Unable to go along with France, but unwilling to admit it publicly, the Germans are resorting to other measures. They criticise the Community's failure in Yugoslavia, despite the fact that Bonn has ruled itself out of any action in the Balkans. And, while it still believes in a joint Community approach to trade negotiations, Germany signs separate agreements with the Americans to exempt its goods from any trade retaliation threat. The Franco-German axis resembles a couple whose marriage has irretrievably broken down, but who still turn up at dinner parties together, just to keep up appearances.

Seen in this light, the Bundesbank's decision to nurse Germany's currency as it sees fit, rather than sacrifice its independence on the altar of France's dream, should be welcomed. The situation is now clear: however the current crisis is resolved, it is the Germans who call the shots in Europe.

French leaders would do their country a great favour if they disabuse themselves of the idea, still cherished by Paris intellectuals, that economic facts can change overnight because bureaucrats decree that they should. They should take courage from the fact that the crumbling of the current ERM arrangements is not the end of the world: the Werner Plan for European monetary union, proposed in the late Sixties, collapsed, as did the 'snake' of the Seventies, but the EC soldiered on.

More importantly, the leaders in Paris should not fool themselves by blaming their current predicament on the 'gnomes in Frankfurt' or 'Anglo-Saxon speculators'. Some of the most important sellers of the franc are French companies which, quite properly, prefer to defend their balance sheets rather than sing the 'Marseillaise'. Markets are about profits, not national sentiments; dealers are there to defend millions of investors, not protect politicians who make promises that people know they cannot keep.

Since its inception, the EC has operated on the assumption that economic co-operation would lead to political co- operation. France must understand that this process must now be reversed: political co-operation should lead to economic convergence, which, in turn, may result in a currency convergence. If similar disasters are to be avoided in the future, this process cannot be leapfrogged.

Germany will remain the Continent's greatest power, both politically and economically. In the coming years, the main political divisions within France will not be between left- and right-wing parties. Rather, the debate will be about France's European path. It is in the interest of all Europeans that this debate be concluded as soon as possible. No durable European framework is possible without France. But none is feasible with French politicians who cling to yesterday's certainties because they fear any alternative.

Mr Balladur should remember de Gaulle's words. Referring to his arrangements with Germany in the early Sixties, de Gaulle remarked that treaties are 'like young ladies and roses: they last while they last'. When this was relayed to Adenauer, the German Chancellor replied that, while he could not comment on young ladies, he knew a lot about roses, 'and the plants which have lots of thorns are the most resistant'.

The author is Director of Studies at the Royal United Services Institute.

(Photograph omitted)