11 May 2012 Last updated at 07:39 ET

Article written by Stephanie Flanders Economics editor

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Europe: The big debate

 

Who is winning the argument in Europe on austerity, growth and the connection between the two?

I had a lively debate on this question this week with the BBC's veteran diplomatic correspondent James Robbins on the World Service.

I use the word "veteran" advisedly, but as James reminded us, he has been covering European issues for so long, he was there in Maastricht in 1992, when the basic rules for the single European currency were first agreed and signed into law.

In the programme we also heard from some distinguished economists from around Europe, all with a slightly different take.

As I suggested earlier this week, there's plenty of talk, now, about the need for Europe to focus on growth. But little agreement on what that means in practice - among economists, or policy-makers.

Will Chancellor Merkel and soon-to-be French President Hollande be able to find a common path? No-one knows.

When Frenchmen talk about the need to focus on growth, German officials take that as a code word for stimulus. It conjures up images of giant Keynesian taps being turned on - gushing out more good taxpayer money after bad.

Mr Hollande would say that is not what he - or the likes of the IMF - are talking about, when they talk about slowing the pace of cuts. What they are saying, rather, is slower consolidation could help the economy and the public finances at the same time. Because slower growth can push up the deficit as well.

If they can persuade the German Chancellor that it makes sense, even from the standpoint of the public finances, to balance budgets over a longer time frame, they might actually be able to reach a deal.

Lest we forget, this was precisely the argument that Germany made to its European partners a decade ago, in explaining why it was not going to get its budget deficit back to below 3% overnight.

Germany's deficit was above 3% in 2001, 2002, 2003, 2004 and 2005. Perhaps all Chancellor Merkel needs is a helpful reminder?

Something tells me it won't be that simple. Mr Hollande and others will need to sound more committed to reforming the economy, for starters.

But James Robbins agreed with me that the political pressures now on the German Chancellor do not necessarily make a Franco-German compromise harder to reach.

It is Chancellor Merkel's liberal partners who have suffered most in the polls in the past few months, while the Social Democrats have gained (plus a new "pirate" party, dedicated to internet freedom, who have been winning an astonishing 8% of votes cast in recent polls).

So, if anything, the centre of political gravity in Germany has shifted toward the more pro-European parties in the past six months. That's despite all the talk here about Germans being "fed up" with the euro. Apparently, it is just that: talk.

That doesn't mean that Merkel and Hollande are a match made in heaven. It does mean that the politics and economics of the situation - for both leaders - is more complicated than we might think.