Handelsblatt: Monsieur Moscovici, after the terrorist attacks in Paris, French President François Hollande said that the “security pact” would be more important in the future than the E.U. Stability Pact. Will his country now borrow money without inhibition?
Mr. Moscovici: I was born in Paris, and I experienced the collective shock first-hand when I was there on the day of the attacks. The situation reminded me of September 11, 2001. I was in a plane over New York when the World Trade Center collapsed. At the time, a huge country came to a standstill all at once, and we are now experiencing something similar in France. I can understand very well that France’s entire political class is now declaring national security as its top priority. Eurogroup President Jeroen Dijsselbloem and German Finance Minister Wolfgang Schäuble also immediately expressed their sympathy for that.
Don’t the attacks offer France a perfect excuse to continue to stubbornly ignore European deficit limits?
It would be absurd to require France to save the additional costs it incurs for security in other areas. Besides, the sums we are talking about here will not significantly affect French budgetary development. The country can expect additional expenditures of less than 0.05 percent of the gross domestic product (GDP). This will not prevent France from meeting its deficit targets for 2016 and 2017. The European Commission should show some understanding in this case.
The European Commission has already indulged France to a considerable extent. Paris has violated the deficit rules for years, and the budget deficit is not expected to fall below the prescribed level of 3 percent of GDP until 2017. Is that even realistic anymore?
The European Commission unanimously arrived at the assessment that France is largely adhering to the rules of the Stability Pact. According to our forecasts, the French budget deficit will still be slightly higher than 3 percent in 2017. But the target is certainly achievable if the government in Paris makes additional cuts in that year, provided economic growth remains on track.
“The refugee crisis is a special situation, and we will use the flexibility provided in the Stability Pact.”
You were the French finance minister for several years. Has your view of economic policy and budget guidelines changed since you went to Brussels as a European commissioner?
Of course. In Brussels, we have to keep an eye on the interests of the entire euro zone, which includes watching the consequences of national economic policies for other countries. However, I must say that my political convictions have not changed and, in fact, have been strengthened so far in my term as E.U. Commissioner. For instance, I have always felt that reducing budget deficits is necessary.
Still, when you became commissioner, many in Berlin derided you as a French “debt socialist.” Does that still bother you?
No, it’s faded away. I have been to Berlin three or four times in my position as commissioner, because it’s important to me to explain what I do to the Germans. And yes, you can be a Frenchman and believe that rules are very important. And as a Frenchman, you can also stress that a country like France must remain competitive. German Finance Minister Wolfgang Schäuble and I may not always agree, but we are connected by a deep friendship. And I have a lot of respect for the approach taken by Chancellor Angela Merkel in the refugee crisis.
In that respect, you diverge from many other politicians in Europe, who refuse to support Ms. Merkel on this issue.
It only forms a stronger bond between France and Germany. Both countries were attacked. Mine was attacked by terrorists, and Germany was attacked because other European nations have unfortunately not understood the German position on the refugee question.
And they still disagree with it today. Eastern European countries do not want to contribute to the €3 billion ($3.27 billion) Europe is promising Turkey so that the country will keep refugees in its territory. Where can the money come from?
The Commission wants to provide €500 million, and to my knowledge, we don’t have any more money than that.
If individual countries are supposed to contribute the money, their budgets will be more heavily burdened as a result. Considering the Stability Pact, how do you intend to address this issue?
We have already said that we see the refugee crisis as a special situation, and that we will use the flexibility provided in the Stability Pact for such cases. We will examine how many costs can be attributed to the refugees in countries like Italy and Austria, and we will take this into account. And we are still discussing how to address payments to Turkey, for example.
“The German trade surplus is threatening to get out of hand.”
Let’s turn to Germany, where the government is fighting tooth and nail against the final building block of the banking union, joint deposit insurance. Is Germany wrong?
I am familiar with the German concerns, which have to do with the structure of the German banking sector. However, the European Commission’s approach is realistic and legitimate. The discussion is just beginning, which is why no one should threaten a veto.
The German government isn’t thrilled, either, about your criticism of the German current account surplus. Aren’t there more important things to set straight in Europe?
Germany is Europe’s strongest and most competitive economy. This is good, not just for Germany but for all of Europe. However, we believe that the German economy could have a broader base.
Why aren’t you simply pleased that Germany is booming?
The German trade surplus is threatening to get out of hand. It will reach almost 9 percent this year. Besides, domestic demand is lagging behind. In other words, the German economy is still falling short of its potential. We issued recommendations to Germany in the spring, which included strengthening investment in infrastructure and improving competition in the service sector. Both measures would stimulate domestic demand.
But Germany will have to invest many billions of euros in supporting refugees.
We on the Commission assume that accepting the refugees will stimulate the economy in the medium term by up to 0.3 percent throughout Europe. In countries with large numbers of refugees, like Germany, this effect could be even stronger.
In Portugal, a government that was implementing the requirements of a European bailout program was just voted out of office. What conclusions do you draw from that?
It’s called democracy. However, I should correct you: The incumbent received the most votes but was unable to secure a majority to form a government. As E.U. commissioner, I very much regret that we have not received a budget proposal from Lisbon yet. This is the first time we have experienced this type of situation. I expect that the new government will submit a budget proposal very quickly.
The new Portuguese government has already spoken out against the austerity program…
…and promised, at the same time, to respect the European rules. Portugal will have to consolidate its budget, as agreed. We are flexible on everything else. It’s not up to the Commission to give a country detailed instructions on what to do.
In Greece, the government of Alexis Tsipras is dragging its feet implementing the imposed reforms.
The Greek government is prepared to work with us in a constructive way. I know that we face very tough discussions on pension reform. But I am optimistic, because this reform is unavoidable if Greece hopes to become a normal economy in the euro zone.
When do you anticipate a debt haircut for Athens?
Only after the first review of the current aid program and the implementation of pension reform will we talk about a possible restructuring.
For the International Monetary Fund (IMF), however, a debt haircut is a precondition to its participation in the third aid program for Greece.
The IMF must be involved. Its participation is necessary for Greece and imperative for Germany. But this much is certain: The IMF will only remain in the game if things go well in Athens.
Next Monday, European finance ministers will meet once again to discuss a possible tax on financial transactions. Do you expect a breakthrough?
I am calling on the member states to redouble their efforts, in order to achieve a compromise.
How much progress have you made so far?
We have nailed down 95 percent of the necessary details in recent months. It would be absurd if we were to fail at such a late date.
Why is an agreement so important to you?
Because we would prove that there is an alternative to unanimity on tax issues. If countries are in agreement, they can decide to press ahead in a subgroup. We have the four most important countries in the euro zone on board for the financial transaction tax: Germany, France, Italy and Spain. That’s why I’m convinced that we will finally reach a political agreement in December.
This interview originally appeared in German business weekly WirtschaftsWoche. To reach the author: email@example.com.