Sean O'Grady: Franco-German entente over the euro is not so cordiale

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What is the difference between "economic government" and "economic governance"? Though technical, it lies at the heart of the rift between the German and French governments, and is of vastly more importance than the admittedly strained personal chemistry between the expansive Nicolas Sarkozy and the down-to-earth Angela Merkel.

"Economic government" is what Paris would dearly love to see in the eurozone, and perhaps beyond. It would mean the final consummation of the single currency project launched by the Frenchman Jacques Delors two decades ago – a European fiscal policy and a European Treasury department to complement the European Central Bank, just like any other sovereign state. The recent innovation of a "special purpose vehicle" to issue eurozone sovereign debt may go some way towards that goal, but its function and scope is still vague. It is certainly not yet a permanent fixture of the European Union, and the German government does not wish it to become so.

"Economic governance" is the preferred model of Berlin, and is subtly but crucially different. The German Finance Minister, Wolfgang Schäuble, recently outlined the key measures Germany wishes to see in the way governments run their public finances, including the controversial pre-approval for national budgets. But that is in the nature of a discipline, to protect German interests – not the same as having the German taxpayer, via a European Treasury, guarantee debts run up by the likes of Greece.

Germany and France will have one priority soon: how to manage a Greek default, inside or outside the eurozone. The Germans have tacitly admitted that such a development is on the cards – hence their call for nations to make "living wills" for an orderly rundown of their obligations, like the banks.

Jolly as the formalities must have been, the meeting between German and France officials must have been a little like a convention of funeral directors.