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| Unity on Eurozone Growth Eludes Germany and France | Unity on Eurozone Growth Eludes Germany and France |
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| BERLIN — Anyone hoping that last week’s market turmoil might spur Germany and France to take decisive action to spur growth in the eurozone was disappointed on Monday. After meeting here, top ministers from the two nations agreed only to work on a plan they will present in December. | BERLIN — Anyone hoping that last week’s market turmoil might spur Germany and France to take decisive action to spur growth in the eurozone was disappointed on Monday. After meeting here, top ministers from the two nations agreed only to work on a plan they will present in December. |
| With concern rising that the eurozone is slipping into recession, and the European Central Bank and the International Monetary Fund calling on eurozone leaders to do more for the economy, expectations were high that leaders meeting in Berlin might reach a grand bargain. | With concern rising that the eurozone is slipping into recession, and the European Central Bank and the International Monetary Fund calling on eurozone leaders to do more for the economy, expectations were high that leaders meeting in Berlin might reach a grand bargain. |
| The German government was expected to agree to invest more in public works if France took steps to improve growth through measures like relaxing labor rules. | The German government was expected to agree to invest more in public works if France took steps to improve growth through measures like relaxing labor rules. |
| But a full six years after a global financial collapse from which the eurozone has still not fully recovered, Monday’s meeting was a reminder of the incremental way that policy plays out in Europe, even in the face of crisis. In the European Union’s loose confederation, national leaders try to maintain a precarious balance between their change-averse voters and the impatient demands of international financial markets. | |
| Often, as in Berlin on Monday, problems are not so much solved as referred to a study group. | Often, as in Berlin on Monday, problems are not so much solved as referred to a study group. |
| Wolfgang Schäuble and Sigmar Gabriel, the German finance and economics ministers, and their counterparts Michel Sapin and Emmanuel Macron, said at news conference here on Monday that they would not present any specific proposals until a meeting planned for Dec. 1. | Wolfgang Schäuble and Sigmar Gabriel, the German finance and economics ministers, and their counterparts Michel Sapin and Emmanuel Macron, said at news conference here on Monday that they would not present any specific proposals until a meeting planned for Dec. 1. |
| Mr. Sapin said, “We want to offer specific proposals — not just announcements but concrete proposals.” | Mr. Sapin said, “We want to offer specific proposals — not just announcements but concrete proposals.” |
| But it was difficult not to conclude that the prevailing position on Monday was Germany’s continued reluctance to spend its taxpayers’ money on priming the euro pump. | But it was difficult not to conclude that the prevailing position on Monday was Germany’s continued reluctance to spend its taxpayers’ money on priming the euro pump. |
| At the very least, the joint appearance, which the ministers said had been planned well before recent market turmoil, served as a show of solidarity to rebut perceptions that Berlin and Paris are no longer able to work together. As the ministers acknowledged, Europe has rarely if ever made political progress without cooperation by Germany and France. | At the very least, the joint appearance, which the ministers said had been planned well before recent market turmoil, served as a show of solidarity to rebut perceptions that Berlin and Paris are no longer able to work together. As the ministers acknowledged, Europe has rarely if ever made political progress without cooperation by Germany and France. |
| Expectations of a tacit accord had nonetheless been high after Mr. Sapin and Mr. Macron on Sunday called on Germany to invest at least 50 billion euros, or $64 billion, through 2017. That was seen as a way to offset the €50 billion in spending cuts that France has planned in the same period to meet Berlin’s demands for deficit reduction. | Expectations of a tacit accord had nonetheless been high after Mr. Sapin and Mr. Macron on Sunday called on Germany to invest at least 50 billion euros, or $64 billion, through 2017. That was seen as a way to offset the €50 billion in spending cuts that France has planned in the same period to meet Berlin’s demands for deficit reduction. |
| “It is in our collective interest that Germany invests,” Mr. Macron said in a joint interview with Mr. Sapin in the Frankfurter Allgemeine Zeitung. | “It is in our collective interest that Germany invests,” Mr. Macron said in a joint interview with Mr. Sapin in the Frankfurter Allgemeine Zeitung. |
| A spending commitment by Germany would help provide France’s leaders with political cover while they pursue unpopular measures that economists say are needed to cut French unemployment, in particular a rollback of laws that make it difficult and costly to dismiss workers. Strict French labor rules discourage companies from hiring in the first place, some economists argue. | A spending commitment by Germany would help provide France’s leaders with political cover while they pursue unpopular measures that economists say are needed to cut French unemployment, in particular a rollback of laws that make it difficult and costly to dismiss workers. Strict French labor rules discourage companies from hiring in the first place, some economists argue. |
| Matthias Kullas, an analyst at the Center for European Policy in Freiburg, Germany, said €50 billion of public investment would be “a flash in the pan” in terms of affecting growth. But, he said, “it would provide a face-saving way to sell reforms to French voters.” | Matthias Kullas, an analyst at the Center for European Policy in Freiburg, Germany, said €50 billion of public investment would be “a flash in the pan” in terms of affecting growth. But, he said, “it would provide a face-saving way to sell reforms to French voters.” |
| But Mr. Schäuble gave no indication that the German government was ready to waver from its determination to have a balanced budget next year and to avoid issuing any new debt. He and Mr. Gabriel said any such investment would have to include a large dollop of spending by the private sector. | But Mr. Schäuble gave no indication that the German government was ready to waver from its determination to have a balanced budget next year and to avoid issuing any new debt. He and Mr. Gabriel said any such investment would have to include a large dollop of spending by the private sector. |
| While popular among voters in Germany, tight-budget measures are seen by many economists as shortsighted, given that the German government can borrow money that is effectively interest-free. Investment in universities, research and development, or roads would pay off in the form of faster growth, many economists argue. Because Germany is the eurozone’s biggest economy, its growth tends to benefit the entire region. | |
| Monday’s meeting did nothing to bolster European stocks, which were already down after a short-lived rally at the end of last week. The German index, the DAX, has down the most — by 1.5 percent, with a big drag from the German software company SAP, whose shares fell nearly 6 percent after a profit warning. The CAC 40, in France, fell slightly more than 1 percent. | Monday’s meeting did nothing to bolster European stocks, which were already down after a short-lived rally at the end of last week. The German index, the DAX, has down the most — by 1.5 percent, with a big drag from the German software company SAP, whose shares fell nearly 6 percent after a profit warning. The CAC 40, in France, fell slightly more than 1 percent. |
| At the prospect of a third recession in the eurozone in five years, a debate has swirled over where new growth might come from. While Germany continues to press for more budgetary discipline from France and other countries whose budget deficits grew during the crisis, a number of countries have pushed Germany to take the lead on spending. | At the prospect of a third recession in the eurozone in five years, a debate has swirled over where new growth might come from. While Germany continues to press for more budgetary discipline from France and other countries whose budget deficits grew during the crisis, a number of countries have pushed Germany to take the lead on spending. |
| Last week, the International Monetary Fund joined that call, asking Germany to increase infrastructure spending in light of signs that its economy also was slowing. | |
| Germany and France are also responding in part to pressure from the European Central Bank, which has called on eurozone countries to overhaul their labor laws while saying that countries that can afford it — a group that includes Germany — should spend more to improve public infrastructure. | Germany and France are also responding in part to pressure from the European Central Bank, which has called on eurozone countries to overhaul their labor laws while saying that countries that can afford it — a group that includes Germany — should spend more to improve public infrastructure. |
| Leaders of other eurozone nations hope that more spending by the German government would spill across the country’s borders and help the rest of the eurozone. | Leaders of other eurozone nations hope that more spending by the German government would spill across the country’s borders and help the rest of the eurozone. |
| Paris is seeking German support for — or at least trying to avoid Berlin’s active resistance to — the French government’s proposed budget for 2015. The proposal essentially asks for leniency from Brussels to meet European Union deficit targets, after France already missed two deadlines in the last three years. | |
| In Berlin, Mr. Sapin pledged allegiance to budget limits, which he said were essential to maintaining trust in the eurozone. | In Berlin, Mr. Sapin pledged allegiance to budget limits, which he said were essential to maintaining trust in the eurozone. |
| “In France, the deficit is too high, that’s clear,” he said. But Mr. Sapin did not say how France would get its budget back within limits prescribed by the treaties that were part of creation of the common currency. | “In France, the deficit is too high, that’s clear,” he said. But Mr. Sapin did not say how France would get its budget back within limits prescribed by the treaties that were part of creation of the common currency. |
| At least on Monday, Mr. Schäuble refrained from criticizing French budget policy. Mr. Gabriel noted that the rules provide some flexibility for countries in distress. | At least on Monday, Mr. Schäuble refrained from criticizing French budget policy. Mr. Gabriel noted that the rules provide some flexibility for countries in distress. |
| Prime Minister Matteo Renzi of Italy has taken a similar stance of deficit defiance, and last week unveiled a budget heavy on stimulus, including investments and tax cuts, to offset the effects of the country having slipped back into a recession. | Prime Minister Matteo Renzi of Italy has taken a similar stance of deficit defiance, and last week unveiled a budget heavy on stimulus, including investments and tax cuts, to offset the effects of the country having slipped back into a recession. |
| Mr. Sapin and Mr. Macron promised that they would reform the French economy, but on their own terms. | Mr. Sapin and Mr. Macron promised that they would reform the French economy, but on their own terms. |
| Mr. Sapin said: “One country telling the other what to do — that has never worked. We are making reforms in France because they are good for France, not because we were asked to.” | Mr. Sapin said: “One country telling the other what to do — that has never worked. We are making reforms in France because they are good for France, not because we were asked to.” |
| In France, Mr. Sapin and Mr. Macron are likely to face significant public and union opposition to any changes in the rules that currently give workers a strong say in company management and that make it difficult and costly to dismiss people. Many economists argue that such rules discourage hiring, and point to Spain as an example of a country where deregulation has translated into faster growth. | In France, Mr. Sapin and Mr. Macron are likely to face significant public and union opposition to any changes in the rules that currently give workers a strong say in company management and that make it difficult and costly to dismiss people. Many economists argue that such rules discourage hiring, and point to Spain as an example of a country where deregulation has translated into faster growth. |
| But the economic benefits of such changes are a tough sell to voters who fear that their jobs would become less secure — especially in France, where François Hollande already has the lowest popularity rating of any modern French president. | But the economic benefits of such changes are a tough sell to voters who fear that their jobs would become less secure — especially in France, where François Hollande already has the lowest popularity rating of any modern French president. |
| Signs of flagging growth in Germany have raised anxiety about a recurrence of the crisis that nearly destroyed the eurozone two years ago. Concern about Europe contributed to turmoil in stock exchanges and bond markets around the world last week. | Signs of flagging growth in Germany have raised anxiety about a recurrence of the crisis that nearly destroyed the eurozone two years ago. Concern about Europe contributed to turmoil in stock exchanges and bond markets around the world last week. |
| The global anxiety was made worse by tensions between France and Germany. | The global anxiety was made worse by tensions between France and Germany. |
| The rapprochement on view at the German Finance Ministry on Monday was an attempt by Mr. Schäuble, an outspoken Francophile, to show that the two countries’ policy differences had not fundamentally shaken their alliance. But, as is the case in France, domestic politics in Germany can act as a restraint on policies that might benefit the wider eurozone. | The rapprochement on view at the German Finance Ministry on Monday was an attempt by Mr. Schäuble, an outspoken Francophile, to show that the two countries’ policy differences had not fundamentally shaken their alliance. But, as is the case in France, domestic politics in Germany can act as a restraint on policies that might benefit the wider eurozone. |
| Chancellor Angela Merkel, leader of the Christian Democratic Union, the party to which Mr. Schäuble also belongs, faces dissent from conservatives who oppose the use of German tax revenue to help the rest of the eurozone. The Alternative for Germany, a right-wing party that wants to scrap the euro, has drained votes from Ms. Merkel’s party in recent state elections. | Chancellor Angela Merkel, leader of the Christian Democratic Union, the party to which Mr. Schäuble also belongs, faces dissent from conservatives who oppose the use of German tax revenue to help the rest of the eurozone. The Alternative for Germany, a right-wing party that wants to scrap the euro, has drained votes from Ms. Merkel’s party in recent state elections. |
| In France, Mr. Hollande faces a serious challenge from the far-right party National Front, and the leaders acknowledged on Monday that they needed to cut unemployment to reduce that party’s appeal. | |
| Mr. Gabriel said the goal of the measures to be presented in December should be to strengthen Europe. | Mr. Gabriel said the goal of the measures to be presented in December should be to strengthen Europe. |
| “If it makes the National Front less of an alternative,” he added, “there is no one here who will be unhappy about that.” | “If it makes the National Front less of an alternative,” he added, “there is no one here who will be unhappy about that.” |