Germany and France Aim to Avert a ‘Lost Decade’
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Version 0 of 1. PARIS — The economy ministers of France and Germany called on Thursday for urgent overhauls and a series of investments in both countries to help prevent them and the eurozone from falling into a stagnation trap. Flanked by the German and French flags during a news briefing at the French Finance Ministry, Emmanuel Macron, the French economy minister, and his German counterpart, Sigmar Gabriel, called for a “New Deal” as they released a report that warned of a “lost decade” of growth if France and Germany stood by and did nothing. “Europe is losing relevance internally and externally,” said the report, written by Jean Pisani-Ferry, a French economist, and Henrik Enderlein, a German economist. The countries could not resign themselves, it said, “to this state of affairs.” France is grappling with low growth, high unemployment and waning competitiveness. Germany, which has performed strongly for the last decade, risks slowing if it does not step up investments in infrastructure, the report said. The report called for a split policy mix that would rely on investment in Germany to stimulate demand, while other countries including France would pursue changes meant to bring long-term improvements to their economies, the way Germany did a decade ago when it overhauled its labor laws. No figure was given on how big the investment in Germany should be, but any proposal would most likely be separate from the Europe-wide initiative announced this week by Jean-Claude Juncker, the president of the European Commission, to spend about 300 billion euros, or $374 billion, in areas like public services, schools and renewable energy. In France, the report urged moving closer to the German labor practice known as “flexicurity,” in which employers and labor unions negotiate within companies to increase or reduce working hours or the labor force. It added a suggestion that is likely to be contentious: to let companies preventively adjust their work forces in response to challenging market conditions rather than an outright business downturn. Other recommendations included altering France’s framework of labor laws and creating a leaner, more effective state. Germany was urged to respond to demographic challenges by preparing for a greater influx of immigrants and women in the work force. Most of all, the report called on Germany to step up spending, including encouraging Germans to direct nearly €2 trillion now held in normal savings accounts toward investments in domestic and foreign equities. “France is in a situation of economic weakness,” said Mr. Macron, “and Germany has a problem with growth that is not all-inclusive.” Fixing the situation is urgent, he added, because “our destinies are linked.” |