Thursday

21st Jun 2018

Germany points to France's deficit commitments

  • France is to pass budget cuts and reforms worth €50bn on Tuesday (Photo: Moyan Brenn)

France's new finance minister Michel Sapin on his first trip to Berlin on Monday (7 April) gathered support for more reforms and budget cuts, but was referred to the European Commission on a deficit deadline postponement.

Sapin and his German counterpart, Wolfgang Schaeuble, tried to put up a united front in a joint press conference after the meeting.

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They emphasised the things they agree upon – banking union, a financial transaction tax, more competitiveness, more growth.

Schaeuble said they "get along well" and "value each other".

"We may not have the same political ideas," said the German centre-right politician about his Socialist counterpart. "But Franco-German cooperation is beyond that, we have a firm democratic commitment irrespective of the result of elections."

Sapin even joked that when people are confused about the former economy and finance ministry now being split in two, he explains: "I am the French Schaeuble."

But pleasantries aside, the elephant in the room and recurring question from journalists was Sapin's first announcement as finance minister – that he will seek an extension to the already-delayed deadline for France to meet the EU deficit target of three percent of GDP.

The EU commission last year gave France a two-year extension to bring its deficit below three percent from 4.3 percent in 2013.

Schaeuble said this was not a topic for discussion and pointed to Sapin's reassurances that France will stick to its commitments.

Sapin said this was something to negotiate with the EU commission – a first occasion being at the end of the week in Washington when the acting economics commissioner, Siim Kallas, will participate along with Schaeuble and Sapin at the International Monetary Fund's spring meeting.

The new French finance minister emphasised his government's commitment to make economic reforms and budget cuts, with a €50 billion package of measures being put to the parliament's vote on Tuesday.

"I wanted to inform the German finance minister what the French government decided and will announce tomorrow in a confidence vote in the Parliament," Sapin said, stressing that the reforms package is linked to the survival of the newly reshuffled government.

He said the lesson learned from the bruising local elections result was that the government needed to move "faster and more coherently" on reforms.

But he also talked a lot about a "balance" that needed to be struck between budget cuts and measures to boost the meagre economic growth that has returned to France.

Schaeuble seemed pleased. "France knows its responsibilities and this was confirmed today. We don't give each other grades, we know we need each other and Germany needs a strong France. When the responsibility pact was announced earlier this year by President Hollande, Germany said it was a good measure and we support France on this path," he said.

Meanwhile, Olli Rehn, the economics commissioner who just stepped down to campaign for an MEP post, said that France should not be given special treatment compared to other countries just because it is a large economy.

Former Eurogroup chief Jean-Claude Juncker – currently lead candidate of the centre-right in the EU elections – also said that "France should comply to the same rules and agreements that apply to Cyprus, Malta and others".

The head of the German Bundesbank, Jens Weidmann, also said that France is a model for how the new rules on budgetary discipline are applied. "That's why we should insist in pointing out to France its commitments in this regard," he said.

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