Sunday

22nd Apr 2018

Hollande: Germany should do more to boost growth

  • Germany's Angela Merkel should do more to boost growth in Europe, says Paris (Photo: Council of European Union)

French President Francois Hollande has said Germany should do more to support growth as his government struggles to bring its budget deficit to within the EU threshold.

In an interview with Le Monde, published Monday (4 August), he indicated that France was undertaking reforms but needs more support.

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"We are putting in place the reforms announced but the rhythm of the efforts taken to reduce the deficit also depends on growth. We are not asking any leniency from Germany but we are asking that it does more to boost growth."

"Its trade surplus and its financial situation allow it to invest more. That would be the best thing it could do for France and Europe."

He made a similar call for action on the European Central Bank (ECB) saying there was a "real deflationary risk in Europe" and that inflation in France had never been as low as it is now.

"Weak inflation too has negative fiscal consequences on revenues as well as on debt. A lot will depend on the level of the euro, which has weakened over the past few days but not enough," Hollande said. "The ECB must take all necessary measures to inject liquidity in the economy."

The interview is being interpreted in French media as further ground preparation by Paris for warning its partners that it is likely to again have a budget deficit exceeding 3 percent of GDP.

France has already been given two years' grace, from 2013 to 2015, to meet EU rules but its efforts have been hampered by the country's poor economy.

The European Commission has forecast that it will miss its target next year. So far the French government has been insisting it will meet the EU goals but it has also increasingly called for flexibility.

Germany, for its part, is laying more emphasis on growth policies but has not abandoned its focus on reducing budget deficits.

The difference in policy outlook is highlighted by the simmering dispute about which portfolio France's next EU commissioner - Pierre Moscovici - should have.

France - repeated once more by Hollande in the Le Monde interview - is looking for a "large economic portfolio".

However Germany has baulked at Paris taking charge of the economic and monetary affairs dossier, which would give Moscovici discretionary powers over how the euro rules are applied.

German finance minister said the decision on who takes the portfolio is very "sensitive" and carries "symbolic weight".

Germany's mass-selling tabloid also recently weighed in on the debate with a columnist saying that "Moscovici made the euro as soft as French brie with his talk as French finance minister."

Moscovici hit back telling Der Spiegel that he had "initiated key reforms" while he was in office.

The division of portfolios for the next commission is only due to become public around the beginning of September. Other economic portfolios that Moscovici could be in line for include one on promoting growth policies.

Incoming EU commission president Jean-Claude Juncker has said he wants to initiate a €300 billion public-private investment programme to boost the European economy over the coming three years.

Macron and Merkel pledge euro reform

France and Germany have pledged to forge a joint position on euro reform by June, despite German reluctance on deeper monetary union.

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