France, with new concerns that the country is about to get its credit rating downgraded sparking fresh panic in the markets this week. In charistaristic style French president Nicolas Sarkozy has sprung into hyperaction, running around Paris giving speech after speech to reassure the markets he is taking drastic austerity steps. But his announcement yesterday that he and German chancellor Angela Merkel will hold a crisis meeting in Berlin has confused his German counterpart. "What meeting?" was her response.
Apparently this "crisis meeting" Sarkozy was referring to had already been planned before the rumours of a French downgrade started. Now senior figures in the German government are reportedly annoyed with Sarkozy's urgent tone this week, as Merkel has preferred to project a calm, level-headed response. She is reportedly unnerved by Sarkozy's extreme reaction and thinks it will spook the markets even further. next week's meeting, the Germans think, should not be portrayed as a "crisis" meeting.
The incident is typical of the relationship between the two leaders. Sarkozy is brash and impetuous, Merkel is reserved and thoughtful. As often as Merkel is accused of inaction, Sarkozy is accused of overaction.
So who's approach is going to win out? There is concern in Germany that Sarkozy is staging such a theatrical response to the French rating rumours this week because of domestic political considerations. His poll numbers in France have fallen to dismal lows, and he needs to be seen to be taking charge. But Merkel believes that overresponse to things like this are going to make it look like European leaders have lost control. She decided against cutting short her holiday in Austria in the wake of the recent stock market crashes, whereas Sarkozy has returned and recalled his entire cabinet.
But Germany still holds the purse strings, and it may be that in Tuesday's meeting Sarkozy is told to cool it. But by then France's rating may have already been downgraded. This morning four EU states - France, Belgium, Italy and Spain - instituted a temporary ban on short-selling in an effort to stem the market turmoil, But eventually that ban must be listed, and many are concerned the act of instituting the ban will cause more trouble than good because of the panic it could create.
Going forward, it looks like Merkel and Sarkozy will have to pick a strategy if they want to present a unified front - calm and slow or fast and urgent.