Growth: Berlin Rejects Requests from Paris

On Wednesday, June 6, a text from the German Ministry of Economics began circulating, a text entitled “More Growth in Europe: Employment, Investment, Innovation”. The memo was intended to be the basis for discussions on June 13 between Angela Merkel and her opposition. These discussions should enable a temporary agreement between the Social Democratic Party, the Greens and the German Chancellor for the adoption of the proposed fiscal pact, an agreement which has been stalled by calls for more emphasis on growth.

Even if this is the first step towards the inclusion of a growth component championed by President François Hollande, the success necessitates relativism. The eight-page text from the German Ministry is organized into two parts, the first on what should be done on a national level, the second on what can be done via the EU. However, the document is preceded by an introduction which pleas for the continuation of the German liberal economic system, criticizing at the same time the positions of the French President.

The text explains that growth can only come from a reduction of public debt, made possible only by labor market reforms. Responsibility for growth and employment should rest with Member States and not positioned at the community level. According to the text, the solution should “necessitate privatization”. “The forces of growth” should first be “unleashed”, namely by “liberalizing [in Member States] railway traffic”. In regards to the hypothetical need for new infrastructure, “it is important to use more private capital”, but these projects must strictly address what is deemed to be genuine need.

President of the Social Democratic parliamentary group at the Bundestag, Frank-Walter Steinmeier, has already held a draft of this text insufficient. In addition to its liberal economic tone, the text contains no reference to a tax on financial transactions.

While the Liberal party seems to be on the offensive again on European issues, rejecting for instance any prospect of a union bank, the document appears to be more the result of internal balances in the governing coalition in Berlin rather than an effort to reach agreement with the opposition and a compromise with France.

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