AP Interview: French ex-president Giscard d'Estaing urges tighter French-German ties in crisis

PARIS – PARIS (AP) — France and Germany must rebuild their intimate partnership in order to pull Europe out of its financial crisis, Valery Giscard d'Estaing, the former French president who devoted his life to forging a unified Europe, said in an interview with The Associated Press.

Giscard d'Estaing blamed the new generation of European leaders for failing to anticipate the dimensions of the crisis and failing to act quickly enough to put the continent back on track.

"The hesitations that took place for the last month and a half on the question of aid to Greece had very negative effects. We arrived at a good solution but after debates with which we could have done without and which, at least for Germany and France, should not take place in public," he said.

He deplored the deterioration in the central role of France and Germany in eurozone decisionmaking and said it was essential for Paris and Berlin to revive their political primacy.

"The European system, unfortunately has distanced itself a bit from the practice that we created, which was Franco-German intimacy. We moved away from this practice, and I wish that we would return to it."

He added that "it will come back because it is an absolute necessity. You will see that ... if there is not agreement between France and Germany, the desirable decisions will not be taken."

France was a driving force in the 1992 creation of the euro, the culmination of a half-century of efforts to integrate Europe. The near collapse of Greece, colossal public debt and the sharp slide in the euro has led some in France to question whether the euro should continue to exist, and what would remain of Europe it if did not.

The cover of the left-leaning news weekly "Le Nouvel Observateur" this week had a shiny 2-euro coin being licked by flames with the apocalyptic headine: "Should the euro be burned?" In the conservative daily Le Figaro, former Prime Minister Eduard Balladur predicted: "If the euro disappeared, Europe would drop out of history."

Giscard d'Estaing was born in Germany when his father served there after WWI. He fought in World War II, served as finance minister under former President Charles de Gaulle and was France's president from 1974-1981. At 84, he regards the current crisis with the sang-froid and the long view of a statesman with experience of other crises, notably the sharp currency fluctuations that European leaders had hoped would end with the creation of the euro.

"The euro will not disappear," Giscard d'Estaing said. "The first consequence of that would be a return of competitive devaluations, because none of the currencies that are now in the euro would preserve their parity if the euro disappeared. You would probably have a revaluation of the deutschmark and most certainly the devaluation of most of the rest of currencies with variable rates, thus, a total disorder."

Reports and rumors as to the possible exit from the euro from powerful countries like Germany and the Netherlands or weaker ones like Greece amount to "an excessive dramatization" of the situation. He called any idea of ejecting Greece "politically unrealistic" and added that "there is no danger of seeing Germany or the Netherlands distance themselves from the euro."

The drop in the euro, which still remains above the rate set when it went into circulation, has positive aspects, he said, including making eurozone nations' exports more competitive in global markets.

The downside, in Giscard d'Estaing's view, which is shared by senior members of President Nicolas Sarkozy's Cabinet, is that the sharp fluctations in the euro leave it open to speculators, which have become anathema for the French elite as well as one of its favorite scapegoats for the crisis.

For now, he says, the wave of speculation he said was affecting European sovereign funds appears to have receded, but the crisis revealed what he calls a fundamental change in banking — one that is not welcome in Europe.

Apart from the debt crisis, Giscard d'Estaing says the current global woes are due to the financial meltdown that was lit by the subprime mortgage crisis and then caught fire in the banks in New York in 2008.

"This revealed the fact that there has been a change in the nature of the global banking system, that the culture of the system went from a culture of lending to a culture of trading and a culture of the speculator," he said.

German Chancellor Angela Merkel won his praise for her unilateral ban on naked short-selling of eurozone government debt and shares of major financial companies — even though she made the decision this week without consulting Berlin's eurozone partners.

"The measures adopted by Germany yesterday are good measures, justified, because at the end of this crisis, the eurozone must be a zone in which there is relatively little place for speculation," he said.

In his day, Giscard d'Estaing said, he and then-Chancellor Helmut Schmidt would have quelched the crisis in private. The need for the key leaders of the industrialized world to meet quietly, away from the cameras, was one reason that he convened a summit in 1975 at the chateau of Rambouillet southwest of Paris — a summit that became an annual event known as the G7, or Group of Seven.

"We have to bring back the Franco-German intimacy. We have to ensure that the measures decided in May are applied and give the corresponding instructions. They will be applied only if the heads of state take care of it. The administrations on their own are not capable of applying them and to show that Europe has the vocation to be a zone of stability and low speculation, regardless of what goes on in the rest of the world," Giscard d'Estaing said.