Le Modèle Gerhard Schröder

Billions in Cuts

Tuesday, French President François Hollande announced a wide-ranging renunciation of his previous economic and financial policies. As he explained at a press conference, public expenditures will be significantly cut and private economy will be given new perks, over the next few years. Beginning in 2017, family social insurance contributions, which, until now, enterprises had been obliged to pay, will be canceled, saving them up to 30 billion Euros. At the same time, Hollande declared, he would save 15 billion Euros in public finances; from 2015 to 2017 another 50 billion Euros would be saved. Where he plans to cut, currently remains unclear.

Wage Waivers as Competitive Advantage

Paris' change of course, was induced by massive pressure from Berlin and France's growing economic deficit in relationship to Germany. The latter grew out of an aggressive German austerity policy. Back in the spring of 2010, a French expert calculated that labor costs in Germany had sunk by 1.3 percent since 2000 - thanks to the "Agenda 2010" - while, in France, they had risen by 17 percent in the same period.[1] Between 2000 and 2008, German real income shrank by 0.8 percent, whereas in France, it rose by 9.6 percent.[2] The wage waivers of German employees had provided German companies competitive advantages, which have resulted in a strong growth of exports. Therefore, the German foreign trade surplus in relationship to France had risen to around 40 billion Euros by 2012, a clear indication of the aggressiveness of the German - and the docility of the French - economies. This can also be seen in a direct comparison: Whereas in 2000, the French added value was at 50 percent of the German, by 2010 it had fallen to merely 40 percent.[3] Because Berlin adamantly refuses any change of course toward a more demand-oriented economy, Paris has now decided to introduce its own austerity measures - to favor French industry.

European Reform Spirit

Hollande's announcements are being loudly applauded in Berlin. He is "happy to hear the announcements from France," said Foreign Minister, Frank-Walter Steinmeier. "A reorientation of the French economic policy" can "only be seen as good news."[4] The German Ministry of Finance has announced its "great respect."[5] Minister of the Economy, Sigmar Gabriel (SPD), "very heartily" welcomes the change of course in France.[6] It has been repeatedly pointed out that Hollande is actually introducing measures that had been imposed by the Schröder/Fischer coalition about ten years ago. Media commentators, speaking of a "European reform spirit" in Paris, are posing the question, whether it was "François Hollande and his advisors in the Élysée Palace" or "rather the Chancellery in Berlin," who had written the French President's speech.[7] Observers, making reference to Chancellor Gerhard Schröder's "Agenda 2010," consider that Hollande's advisors must have "studied very closely Schröder's agenda operation plan for the year 2003." Back then, "the initiation" was "Schröder's New Year's address, in which he announced 'fundamental changes' to come. This is exactly what Hollande is doing eleven years later."[8]

Sarkozy, the German

With his change of course, President Hollande is taking the same path that, nearly two years ago, had cost his predecessor, Nicolas Sarkozy, the presidential elections. Following defeat in his power struggle with the German Chancellor over the strategy for handling the EU crisis, Sarkozy capitulated in 2011 and began initiating reforms along the lines of Berlin's austerity model. There was "growing reference" to Germany "in the discourse of President Sarkozy's conservative UMP" party, according to the German Council on Foreign Relations (DGAP) at the time. "What is being presented in France as the German model corresponds largely to the Schröder government's Agenda 2010."[9] In December 2011, Sarkozy ostentatiously invited Schröder to the Èlysée Palace for a debriefing on the "Agenda 2010". Sarkozy had his cabinet's Minister of Agriculture, Bruno Le Maire, a specialist on Germany, to elaborate the UMP's election program - in direct collaboration with Germany's CDU party.[10] Making reference to his pro-USA orientation, at the beginning of his term of office, the DGAP notes that "Sarkozy, the American" as he liked to call himself, became "Sarkozy, the German."[11] In the elections in the spring of 2012, Sarkozy had no chance against Hollande, who campaigned on a platform of resistance to German austerity policy - and won.

An Enormous Construction Site

There is, therefore, certain scepticism in Berlin about whether Hollande can follow through with his announced project. He has "opened an enormous construction site that will provoke a lot of civil unrest throughout the country," according to one commentator. It will be "watched with great suspense throughout Europe, but particularly in Berlin" to see if he holds through with his "change of course."[12] This is referring to the tangibly high protest potential in France, which makes it uncertain whether the replica of the "Agenda 2010" can be imposed.

German President's Wish

There are also economic doubts. During the implementation of "Agenda 2010," Germany went into a debt superior to 3 percent for several years, to help that project to succeed. It remains uncertain whether Paris will be allowed to do the same. It is unlikely that France will again be able to economically keep pace with Germany with its austerity program, because Berlin is far from running out of new austerity policy measures. If France comes along, these measures can be implemented. Fitting into this frame of thought, German President Joachim Gauck complained yesterday, Thursday, that many still consider the term "competition" to have a connotation as negative as that of "neo-liberal." However, he would "wish" that in Germany, there would be greater sympathy for competition and more "recognition for the broad spectrum of liberalism ... all the way to Friedrich August von Hayek," one of the figureheads of market radicalism.[13] The trail Gauck is attempting to blaze, should allow Germany to easily outdo Paris' austerity program - if Hollande is successful with its implementation.

[1] Non-dit franco-allemand, par Jacques-Pierre Gougeon. www.lemonde.fr 05.04.2010. See also Die Frage der Führung.
[2] See also Hartz IV for Everyone.
[3] Henrik Uterwedde: Ende der Divergenzen? Perspektiven der deutschen und französischen Wirtschaftspolitik. DGAPanalyse No. 11, November 2013. See also The Disengagement of France.
[4] Außenminister Steinmeier: Mutige Ankündigungen des französischen Präsidenten. www.auswaertiges-amt.de 15.01.2014.
[5] Daumendrücken an der Spree. Frankfurter Allgemeine Zeitung 16.01.2014.
[6] Bundesregierung lobt Hollandes Reformpläne. www.spiegel.de 15.01.2014.
[7] Monsieur Hollandes kopernikanische Wende. www.sueddeutsche.de 16.01.2014.
[8] Ein Mann erfindet sich neu. Frankfurter Allgemeine Zeitung 16.01.2014.
[9] Claire Demesmay: Deutschland: Die Kandidaten und die Gouvernante. dgap.org 05.04.2012.
[10] See also Sarkozy, the German.
[11] Claire Demesmay: Deutschland: Die Kandidaten und die Gouvernante. dgap.org 05.04.2012.
[12] Günther Nonnenmacher: Hollande in der Kurve. Frankfurter Allgemeine Zeitung 15.01.2014.
[13] Rede von Bundespräsident Joachim Gauck bei der Festveranstaltung des Walter Eucken Instituts. Freiburg, 16.01.2014.