Germany is not responsible for France’s economic problems and is not duty-bound to solve them either, the head of Germany’s main industry lobby said yesterday.
Europe’s largest economy is under pressure from the likes of France and Italy to loosen the fiscal reins and use government coffers to boost investment. But Finance Minister Schaeuble has stuck to his line that reform is the best way to foster growth.
“Germany is not to blame for the French economy’s structural problems,” Ulrich Grillo, the head of the BDI association, told a conference in Berlin attended by Chancellor Angela Merkel. “It’s also not Germany’s responsibility to solve these problems.”
French Prime Minister Manuel Valls sought on Monday to convince Germany that Paris is serious about making its economy more competitive, declaring that France “is not the sick child of Europe”.
Valls has said he wants to reduce public spending by €50 billion in the next three years and give business tax cuts worth more than €40 billion.
Grillo praised these reform announcements but said they needed to be implemented: “The right deeds have to follow the right words.”
But the German economy is not a picture of health either – gross domestic product (GDP) shrank by 0.2 per cent in the second quarter and some economists have even warned there is a risk it could fall into recession.
“The federal government’s economic policies are not exactly boosting confidence,” Grillo said, adding that Berlin had taken the good situation for granted.
The BDI has cut its forecast for 2014 German growth to 1.5 percent from its previous estimate of 2 per cent and Grillo said the prospects were “not too rosy”, referring to international crises such as in Ukraine, though he also said there was no reason to be pessimistic.
Higher investment should be a priority for Germany, Grillo said. At roughly 17 per cent of GDP, annual investment is below other industrialised countries, which average over 21 per cent. “Germany is sending its transport routes to rack and ruin – they’re crumbling,” he said, adding that it should spend more on fast internet connections and the shift to renewable energy, as well as providing tax incentives for research and innovation.