Reform Recipe

German Finance Chief Praises French Rescue Plan

Schaeuble and Sapin2-CHANGED. Source AFP
German Finance Minister Wolfgang Schäuble likes France's latest reform attempt.
  • Why it matters

    Why it matters

    The French economy, stagnant since 2012, has been a drag on European growth.

  • Facts

    Facts

    • France needs a credible reform plan to attract private investment.
    • Structural reforms, especially in the labor markets, are essential.
    • The German government is working closely with its French counterparts.
  • Audio

    Audio

  • Pdf

We need a strong France in Europe. Europe is strong only when France is strong.

France is confronted with great challenges in its economic and budgetary policies. In these months, the country is struggling, above all, to find the correct path to higher growth and more employment. I salute and support the French government’s “Compact for Responsibility”. Its aim is to strengthen France and, thereby, Europe as well. My old and new counterpart, France’s Minister of Finance Michel Sapin, and I are in complete agreement that enduring and sustainable economic growth cannot be attained with ongoing high deficits, but instead, through sound financial policies that are accompanied by structural reforms and targeted investments.

The “Compact for Responsibility” envisions a combination of expenditure reductions and tax- and fee-alleviations. That is the right way to create a climate of trust and to motivate investors and consumers to invest and buy more. More economically effective than any state emphasis on increased outlays is the mobilization of private investments.

Structural reforms, especially in the labor markets, are absolutely necessary in order to add new and long-term momentum to the economy.

Budget reorganization and deficit reduction constitute a veritable support program for private investments. Sound governmental budgets and dependable underlying conditions promote a readiness to engage in private investment because they strengthen trust in the future stability of our economy. Without this trust, there can be no enduring and sustainable economic growth. But trust can only arise when promised actions are, in fact, carried out. This is true, above all, for structural reforms that have been agreed upon. When they are decisively realized, trust grows.

Structural reforms, especially in the labor markets, are absolutely necessary in order to add new and long-term momentum to the economy. And so I am all the more pleased that the reform debate in France is now focusing increasingly on the labor markets. In order to successfully realize structural reforms in the job markets, a culture of cooperation between employers and employees is needed. Both parties share a common responsibility. The more this realization becomes widespread, the more impact structural reforms can have. This has been our experience in Germany. And this is one of the reasons why Germany has come through the crisis in relatively good shape.

Already at the beginning of the 1990s, we had similar experiences during what were, to some extent, quite painful processes of transformation in eastern Germany and everywhere in eastern Europe. Already back then, unswervingly executed structural reforms achieved enduring growth and new jobs over the long term. Thus, it is important that now in France the social partners in the “Compact for Responsibility” do their part, especially the labor unions.

I have no doubt that France will adopt a successful course in its economic and budgetary policies, which is capable of leading France to renewed vitality and thereby of helping Europe to move forward. This is, of course, true as well for the new government, with which Germany intends to work effectively and faithfully.

The author is the finance minister of Germany.

This article was translated by George Frederick Takis. Jeff Borden also contributed to this story. To contact the author: gastautor@handelsblatt.com

 

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