October 13, 2014 / 11:46 AM / 5 years ago

Berlin and Paris seek reform proposals to avert policy clash

BERLIN (Reuters) - The German and French economy ministers have asked experts in Berlin and Paris to come up with reform recommendations for both countries in an apparent attempt to avert a full-blown clash between the euro zone heavyweights over economic policy.

A combination phooto of newly-named French Economy Minister Emmanuel Macron (L) at the Bercy Finance Ministry in Paris August 27, 2014 and German Minister for Economic Affairs and Energy Sigmar Gabriel (R) attending a news conference in Berlin July 21, 2014. Reuters/Staff

In letters signed by Sigmar Gabriel and Emmanuel Macron and seen by Reuters, the two ministers note that the European recovery is lagging that of other advanced economies, raising the risk of a “lost decade” of weak growth, excessively low inflation, high debt and high unemployment.

The letters ask Henrik Enderlein, head of the Jacques Delors Institut in Berlin and a professor at the Hertie School of Governance, and Jean Pisani-Ferry, a French government adviser and former head of the Brussels-based Bruegel think tank, to compile a report by mid-November with concrete reform proposals.

“As the two largest economies in Europe, France and Germany have a particular responsibility and a critical role to play to ensure both a rapid recovery and a strong and sustainable growth going forward,” Gabriel and Macron write.

By asking the two experts to make reform recommendations for both countries, the ministers seem intent on defusing an escalating war of words between Berlin and Paris, in which German officials have repeatedly lectured France on the need for more hard-hitting economic reforms.

France announced earlier this month that it would not bring its deficit down within European Union limits until 2017, four years later than originally pledged, setting up a confrontation with the European Commission.

Germany is also under fire for sticking with its ambitious goal for balanced budget next year despite a weakening German and European economy.

Finance Minister Wolfgang Schaeuble came under fierce criticism at a meeting of the International Monetary Fund (IMF) in Washington last week for refusing to consider more public investments to stimulate growth.

France, Italy and some other euro nations have been pressing Germany to agree to a Europe-wide initiative to boost investment.


One senior official in Berlin suggested that by proposing the joint reform study Gabriel, a Social Democrat (SPD), was seeking to avert a damaging confrontation between hard-liners in Berlin and the Socialist French government.

“We want a solution that prevents the Titanic from hitting the iceberg,” the official told Reuters.

Another person familiar with the plan said: “We really need to end the France bashing in Germany and the Germany bashing in France by putting forward very specific proposals on what the countries should do.”

Sources said the Chancellery had been briefed on the plan beforehand. Angela Merkel’s spokesman Steffen Seibert told a government news conference that the chancellor welcomed any initiative which might help France in its reform efforts.

A combination photo of German Social Democratic Party (SPD) party leader Sigmar Gabriel (L) at the SPD headquarters in Berlin, September 23, 2013 and newly-named French Economy Minister Emmanuel Macron (R) at the Bercy Finance Ministry in Paris August 27, 2014. REUTERS/Staff

But a statement from the French economy ministry showed that Paris expects movement from Berlin as well. Macron’s ministry said the request for reform recommendations reflected a desire for a “New Deal” in Europe that included a Europe-wide investment plan to be carried out “in the coming months”.

In their letters to Enderlein and Pisani-Ferry, the ministers ask them to focus on key structural reform needs that could be addressed by 2017, with a focus on investment and modernization.

They are also asked to outline possible joint Franco-German initiatives that could enhance competitiveness, structural convergence, integration and growth in Europe.

Reporting by Rene Wagner, Michael Nienaber in Berlin and Natalie Huet in Paris; Writing/Editing by Noah Barkin

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