Growth is the summum bonum of economic policy. Tough to arrange at home: stimulus packages don’t work very well, and monetary policy produces lots of fiat money but not very many jobs. The solution: export-led growth—the other guy will buy so much of your goods and services that your economy will grow. There are two ways to make this sort of growth happen. Lower the international value of your currency so that your output is cheaper overseas, or increase productivity at home by lowering labor and other costs and therefore the prices you need to charge foreigners. The first is painless, or so it seems initially. The second requires a politically difficult assault on benefits and union created labor market rigidities.

So it should come as no surprise that France’s president Francoise Hollande, whose largely unreformed labor market has kept unit labor costs so high that French goods—luxury items, food, aircraft—are struggling in world markets, should want the Eurozone to set a “realistic,” i.e. lower, exchange rate for the euro. German’s economy minister, Philipp Roesler, whose country went through the pain of labor market reform and wage restraint, and is having no trouble exporting goods, responds with a definite “nein.” “The objective must be to improve competitiveness and not to weaken the currency.” This is not a theoretical battle. Morgan Stanley estimates that if there were no euro, it would take $1.53 to buy a deutschemark, and only $1.23 to buy a French franc. So from France’s point of view the euro, at say $1.33, is over-valued, while from Germany’s it is undervalued.