Francois Hollande was inaugurated Tuesday as France's new president. Immediately following the ceremony, the nascent leader boarded a flight to Berlin to meet with German Chancellor Angela Merkel. While the commotion over Greece's inability to form a new government captured much of the media's attention, in Stratfor's view, the future of the Franco-German partnership trumps all other political issues in Europe. This partnership has served as the keystone of the modern European construct and has been the leading force behind the Continent's recovery efforts. But while a Franco-German consensus is immediately critical for Europe, it is demographics that are crucial for survival. Tuesday's European Union 2012 Report on Aging illustrates that European economies will continue to be strained even if France and Germany are able to muddle through the most recent debt crisis.

The postwar construct of Europe, which is currently manifested in the form of the European Union, can only function as long as German and French interests remain mostly aligned or at the very least don't contradict each other. France designed the European Union to be simultaneously a cage and a vehicle for German power. France designed the EU structures to marry Germany's economic potential with France's political leadership, in hopes of unifying the Continent, containing historical and deadly rivalries and making it politically and financially undesirable for Germany to break with the rest of Europe.

However, in the wake of Germany's reunification, France's plan has worked so much to Germany's benefit that Berlin's economic dominance has eroded Paris' political authority and shattered the carefully crafted perception of a balance of power between the two European leaders. The problem for Germany is that it needs France's willing cooperation to carry out its plans without being perceived as attempting to exert authoritarian control over all of Europe. Merkel and former French President Nicolas Sarkozy played these roles to great effect. But Hollande's campaign and subsequent election have exposed the divergent interests of the two countries that Merkel and Sarkozy worked very hard to keep confidential. France's trade deficit with Germany has exploded in recent years, so France's need to develop its domestic economy contrasts directly with Germany's need for European economies to continue importing goods from Germany — rather than producing them domestically.

Tension and uncertainty have surrounded Franco-German relations since the beginning of France's presidential campaign in which Merkel openly supported Sarkozy — who was widely perceived as Merkel's co-commander in the battle against Europe's financial problems. Hollande, for his part, campaigned on platforms that were in direct opposition to Merkel's stated positions. Most critically, he pledged to renegotiate the fiscal compact treaty that is at the very core of Merkel's strategy for institutionalizing fiscal discipline among fellow eurozone member countries. Hollande insisted that recovery efforts should focus on "pro-growth" initiatives rather than the austerity reforms espoused by Merkel. The outcome of Tuesday's summit was inconclusive at best. Both leaders attempted to downplay any tensions while rhetorically neither appeared to back down from opposing positions, nor offer a hint of compromise. Merkel and Hollande indicated that they would continue to work together for the common cause of Europe, but without some appearance of consensus it will get harder to see where that common cause lies.

However, the issue of future economic growth in Europe faces a fundamental problem that lies beyond the reach of any competing economic policies being offered by Europe's leaders. Europe's demographic outlook does not paint a bright future for the prospect of domestically led economic growth returning to the region with any kind of force, and certainly not to the degree that would enable Europe to simply "grow out of" its current economic crisis. The budgetary struggles European countries are experiencing now are nothing compared to what they will be in 20-30 years.

One of Europe's many underlying problems, and this one is completely divorced from the political mess, is that the Continent's population is aging rapidly. Across Europe it is fairly common for 50-somethings (and in some cases even 60-somethings) to outnumber teenagers. This not only increases the pending certainty of much higher pensions costs, but also the imminent inevitability of not being able to pay these increasing costs. In any society, 20- and 30-somethings do most of the consuming, and therefore affect most of the economic growth. Modern economies are reliant on this segment's consumption. But this demographic is rapidly shrinking in Europe — most rapidly in Italy, Greece, Spain and Germany, roughly in that order. For most of these states, the era of consumption-led domestic growth is already over. That leaves exports as the primary source of growth, and since no one can compete with the German export machine, that's really just an option for Berlin.

"Fixing" Europe's economic problem isn't a matter of simple accounting or belt-tightening. Restoring a normal demography requires a mass increase in the birth rate for a decade, followed by sufficient time for those babies to grow up and parent their own children. Even in the most aggressive case, that’s a 30-year process. Sixty years is more reasonable.

Europe's days of economic growth do not have a bright future, regardless of whether France and Germany can agree on a common economic strategy. However, if France and Germany cannot get on the same page, we expect the underlying fissures within the European Union to lead to a strategic division of the Continent sooner rather than later. The larger picture is that Europe's demographic decline will present economic challenges far beyond the scope of the current crisis, regardless of growth initiatives, austerity measures or French-German cooperation. Considering all this, a good working relationship and consensus between Paris and Berlin is critical if Europe is going to stave off this dreary decline as long as possible.