France and Germany to draw up growth plan

Although France didn't persuade Germany to invest €50 billion in the eurozone's flagging economy Paris and Berlin did agree to draw up an action plan for exactly what was needed to boost growth.

France and Germany to draw up growth plan
German Finance Minister Wolfgang Schaeuble (L) and French Finance Minister Michel Sapin address a joint press conference in Berlin. Photo: Tobias Schwarz/AFP

France and Germany, the eurozone's two biggest economies, promised on Monday to do what was needed to boost investment in the single currency area at a time when the region's economy is flagging badly.

"We agreed to draw up a joint paper by the time of the next Franco-German economic council, which will contain the investment possibilities in both countries and our joint vision of Europe," German Finance Minister Wolfgang Schaeuble said.

He was speaking at a joint news conference with his Economy Minister Sigmar Gabriel and their French counterparts, Michel Sapin and Emmanuel Macron, following a mini-summit in Berlin.

The next Franco-German council will meet on December 1.

Monday's meeting came at a crucial time for Paris, which is at loggerheads with Brussels over its 2015 budget as it is likely to overshoot EU debt targets once again.

According to a report in the weekly Der Spiegel, Germany is helping France to draw up a pact with the European Commission on deficit reduction and structural reforms to win Brussels' approval of the 2015 budget plans.

France believes that Germany could help the eurozone's stalling economy by loosening its purse strings and increasing investment to match the savings Paris is seeking to make in public spending.

"Fifty billion euros savings for us and 50 billion of additional investment by you – that would be a good balance," Macron had told the Frankfurter Allgemeine Zeitung.

"It's in our collective interest that Germany invests."

At the news conference, Macron said €50 billion ($64 billion) was the figure Germany could afford to invest without jeopardising its budget.

Both Schaeuble and Gabriel made it clear that while they did not dispute the figure, most of that investment should come from private rather than public funds.

German growth engine stalls

Recent data has suggested that the German economy — traditionally Europe's growth engine — is stalling, threatening to pull the eurozone back into recession and put the brakes on the global recovery.

France, grappling with sky-high unemployment and a ballooning budget deficit, has been spearheading a campaign for Germany to soften its stance on fiscal austerity.

But Berlin remains adamant that the only way out of crisis is for eurozone countries to get their finances in order by sticking to agreed rules on the size of their deficits.

Asked by the daily Bild whether Europe should abandon the path of austerity, German Economy Minister Gabriel said: "No.

"But the money we spend on Europe can be put to better use – for investment in research and development, in a fast Internet and in saving energy," he conceded.

All four ministers denied that with the joint paper to be presented in December, the eurozone's two biggest economies were seeking to strike some sort of deal.

"I haven't asked anything of Germany," said Macron.

"Everyone must do what do what needs to be done," but added: "It is true that Germany has more room than we do to boost investment."

French Finance Minister Sapin also refuted that any deal was on the table.

"There is no pact. We're not looking for a pact. We're looking for everyone to take their responsibilities," he said.

The ministries of Sapin and Schaeuble have been working for weeks now on various investment proposals. The efforts of the eurozone's two largest economies will flank similar efforts made at a European level, with the new EU Commission also keen to boost investment.

The Franco-German effort "will create momentum which will be beneficial to everyone in Europe," said Sapin.

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‘We want to move ahead’: Macron and Merkel to sign new Franco-German treaty

French President Emmanuel Macron and German Chancellor Angela Merkel will sign a new treaty with Merkel's spokesman saying France and Germany: "want to move ahead to ensure the security and wellbeing of citizens as well as a strong, sovereign and democratic Europe."

'We want to move ahead': Macron and Merkel to sign new Franco-German treaty
Photo: AFP

French President Emmanuel Macron and German Chancellor Angela Merkel will sign a new treaty on January 22 to further strengthen Franco-German cooperation in the run-up to next year's EU elections, Macron's office said Tuesday.

The two leaders, both of whom have been weakened domestically, will meet in the French border town of Aix-la-Chapelle to ink an accord “which will strengthen the already close ties between Germany and France,” the French presidency said.

Merkel's spokesman Steffen Seibert said the eurozone's two biggest economies “want to move ahead to ensure the security and wellbeing of citizens as well as a strong, sovereign and democratic Europe.”

The treaty will cover joint projects in the areas of defence, climate change and security as well as the sensitive issue of “economic and social convergence,” the French presidency statement said.

The meeting comes as Merkel enters the twilight of her rule and Macron attempts to defuse the “yellow vest” anti-government rebellion which has engulfed French cities over the past seven weeks.

The couple seen as the glue of the European project will meet in the town hall of Aix-la-Chapelle, former capital of the ninth-century Carolingian Empire, which laid the foundation for Germany, France and several other modern European countries.

The French and German parliaments will, on the same day, adopt a draft agreement on closer cooperation in the form of a 100-member joint parliamentary assembly, the French statement said.

France and Germany's ruling parties and their allies fear an unprecedented challenge from populists in May's European Parliament elections.

In his New Year's address Macron said he would set out his vision for a “renewed European project” in the coming weeks.

The 41-year-old centrist was elected on a promise to revolutionise the post-Brexit EU but Germany shot down his proposals for a huge common fund, with Berlin agreeing only to a limited budget to finance investment.