France and Frankfurt

PRINCETON – Over the past two years, financial markets have turned the spotlight on a succession of countries – Greece, Ireland, Portugal, Spain, and Italy – turning each into the epicenter of a seemingly perpetual European financial earthquake. But politicians always recognized that the heart of the European project was the relationship between France and Germany. Is that relationship now in jeopardy?

There is a falling-domino argument that suggests that the crises on Europe’s periphery will have a knock-on effect on the Franco-German core. France, in the aftermath of a property and asset-price bubble, is vulnerable to some of the same combination of banking and public-finance problems. Indeed, now France’s presidential election has politicized the link between peripheral dominos and Europe’s French heart.