Wolfgang Schäuble and Michel Sapin make an unlikely pair. While the German finance minister was proud to announce his first debt-free budget in 45 years, his French counterpart had to admit failure on Wednesday, saying that France would not reduce its budget deficit to the European Union limit until 2017.
Nevertheless, Mr. Schäuble and Mr. Sapin are now joining forces. Their joint concept, which Handelsblatt has obtained, is titled: “A Strategy to Support Growth and Investment.” It is addressed to the E.U. finance ministers, who will attend a meeting in Milan starting Thursday. Germany and France are trying to create momentum for a European investment offensive.
Mr. Schäuble and Mr. Sapin believe it is long overdue. They write that in 2013, investment in the European Union was 15 percent lower than in 2007, before the global financial crisis began.
There is “an investment gap of 2 percent of economic output, or €200 billion ($258 billion)” in the euro zone, estimates Marcel Fratzscher, head of the German Institute for Economic Research. Mr. Schäuble and Mr. Sapin stress that private and public investment is “the foundation of growth” – and the key prerequisite to overcoming economic weakness.
The German government now accepts that it must provide answers to continued economic weakness in Europe.
Germany and France remain the motor behind European policy reform, but they differ in their views over how best to stimulate growth. German Chancellor Angela Merkel emphasizes structural reforms in labor markets, for example. French President François Hollande favors strengthening domestic demand. But Mr. Schäuble and Mr. Sapin are clearly trying to achieve a consensus between the two countries. In their first joint interview with Handelsblatt in July, the two men focused on the need to continue to curb spending in Europe.
This dictate still applies today. In their concept document, Mr. Schäuble and Mr. Sapin agree that government debt remains far too high in Europe. But at the same time they emphasize that “even in times of tight budgets,” governments must ensure that “an adequate infrastructure” exists. Their words are an indication that economizing should not be an end in itself, and that a rigorous policy of austerity can also be harmful. Mr. Schäuble and Mr. Sapin are also betting on the European Investment Bank, which they hope will increasingly fund growth-oriented projects.
But the concept document does not serve as preparation for an economic stimulus program worth billions, as the Poles recently proposed. However, the German government now accepts that it must provide answers to continued economic weakness in Europe.
The concept by Mr. Schäuble and Mr. Sapin offers the first of those answers.