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When an Unstoppable Force (Germany) meets an Immovable Object (France)

The German export machine is – at present – an unstoppable force, especially when it has the full backing of the country’s banking and political support. France, as is so apparent by the collapse of confidence in the Hollande administration, appears to be unable to move away from a state-reliant economic system.

Which one is more likely to adjust, so that the EU can remain together?  This is the paradox of the Euro system – and its currency value.

The philosophical point is:  neither can coexist simultaneously.  What would be consistent with the metaphor, is an environment where the economic and political forces of each are transferred continuously between the other.  In way, the positive energy of one would be neutralized by the negative energy of the other.  By looking at it in this way, we can see it is really a question of staying power.
The German machine generates GDP per person of 125 a year; the French are create 108 (2011). There are 81 million Germans and 65 million French (2013). The Germans have a debt/GDP of 82 to the French 90%(2012).  Lastly, the Germans are running a slight budget surplus, with the French having a 5% deficit (2012).

It would seem the economic energy in German easily overwhelms the French.  What the French have is intransigence towards changing their economic model. Perhaps this ability to fight change is a match for the energy of Germany currently, barring some outside force disturbing the present equilibrium.

What may shift the balance is a major change in the world’s third largest economy:  Japan.

The Japanese economy has recently improved more than either France or Germany, on the prospect of massive monetary stimulus.  Should the Japanese focus this new found strength in exports, it may reduce the German export machines force.  Since the German export machine has been boosted by Chinese growth, let’s review recent moves for changes in relative competitiveness (in simple form of prices):

This is important to follow, as the Euro/Yen, and Yuan/Yen (above) dollar exchange rates move European politics out of their recent equilibrium.  A ~30% drop in comparative prices is enough to get anyone’s attention.

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