Brussels, 20/10/2014 (Agence Europe) - France and Germany announced on Monday 20 October after a joint meeting of their finance and economy ministries that they will be unveiling proposals on 1 January to boost investment in Europe and their own countries.
French economy minister Emmanuel Macron said various strata of initiatives would be mooted and ideas put forward for Germany, France and possibly joint projects and ideas for the European level.
Before the list of proposals is unveiled at a Franco-German economic council in December, a eurozone summit on 24 October will examine the difficult economic situation and stress the importance of stimulating investment, which is currently at least 15% below the pre-crisis level. In mid-November, a Franco-German committee of experts will publish its views on this question, as well as a joint group including representatives from the European Investment Bank and the European Commission. The Commission will by then have begun working on its €300 billion investment programme, promised by the next head of the Commission, Jean-Claude Juncker, and to be unveiled during the first three months of the new Commission (he takes up office in early November).
Germany does not deny the importance of investment. Social Democrat economy minister Sigmar Gabriel has admitted that Germany should increase its investment levels from 17% to 20%, or €50 billion, as is recommended by the OECD. He says the important thing is to encourage private investment, suggesting possible sectors such as energy or the digital economy, in order to encourage the re-industrialisation of Europe. German finance minister Wolfgang Schäuble said investment should have a greater role in the country's budget policy. Germany refuses to jeopardise the budget equilibrium it achieved in 2013.
Macron said that France and Germany have noticed that the economic situation in Europe is not as good as had been hoped before the summer break, adding that growth had lost momentum. Schäuble said Europe was facing an economic situation that was weakened to differing degrees, but that included Germany. The leading eurozone economy has reduced its growth forecasts for 2014 from 1.8% of GDP to 1.2%.
No challenge to the Stability and Growth Pact. Against this backdrop, ministers say that any sovereign decisions to invest in growth or reform structures would be beneficial to that country and would boost confidence both domestically and within the eurozone.
However, this process of boosting competitiveness will not be facilitated by a revision of the Stability and Growth Pact rules. French finance minister Michel Sapin said the French government is not calling for any changes to the rules, adding that the SGP's 'smart' rules have to be applied in a manner that takes account of the difficult economic context. He pointed out that Manuel Valls' socialist government planned 'considerable' savings of €21 billion for 2015, with the aim of cutting public spending by €50 billion by 2017. Sigmar Gabriel said the rules shouldn't be altered, but flexibility under the SGP should be utilised. He added that nobody these days wanted to change the rules.
The European Commission is in the process of examining the French draft budget for 2015, which includes structural measures below those recommended by Europe and a return to below the 3% of GDP cutoff point in 2017 rather than 2015 (see EUROPE 11170). At the end of the month, it could ask France to adjust the budget, but any such request would not be binding. (MB)