A Controlled Gaffe
PARIS/BERLIN (Own report) - Paris has strongly reacted to Germany's new attempts to impose its austerity dictate on the French national budget. Following the German government's massive interventions in Brussels, German EU Commissioner Günther Oettinger called the French government a "recidivist" in a newspaper column last Friday - because it does not accept the full extent of Germany's austerity dictates. This is an "uncontrolled gaffe," said the General Secretary of the ruling French Socialist Party (PS) and called on Oettinger to resign. To impose more massive budget cuts, Berlin continues its efforts to torpedo the budget compromise reached by the French government with the EU Commission in late October. Since months, observers have been warning against a deflationary spiral and strong social protests in France. The EU Commission's position statement on France's budget, scheduled for today, may have to be postponed because of German interventions.
German Austerity Dictates
Berlin's incessant demands that Paris submit to its austerity dictates have caused the current conflict. During conservative President Sarkozy's incumbency, the German government successfully imposed - against massive French objections [1] - its austerity policy as the EU's standard. Following its first major success earlier this year, when President François Hollande announced budget cuts of 50 billion Euros by 2017 and 30 billion corporate tax cuts, Berlin now seeks to force Paris to apply even more austerity programs.[2] However, massive resistance persists in France against this neoliberal imposition.
"Germany's Extremist Orthodoxy"
President Hollande is facing much stronger opposition from within his own ranks than Chancellor Gerhard Schröder and Vie-Chancellor Joseph Fischer had confronted. Back in August, Stratfor, the US think tank, warned that "a significant increase in social unrest" cannot be ruled out in France.[3] The country "already saw several protests and strikes this past winter," notes Stratfor, which it predicts could "return to France late this year and in early 2015." Due to significant pressure coming from the constituents, members of the Socialist Party (PS) are vigorously opposing the German austerity demands. Last week, 37 PS parliamentarians refused to vote in favor of the latest austerity budget. Last summer, a member of the government had even opposed Berlin's austerity dictates. Minister of the Economy, at the time, Arnaud Montebourg, declared in an interview, "if we align ourselves with the most extreme orthodoxy of the German rightwing, this will mean ... that French people, even though they voted for the Left, they, in reality, will be voting for the adoption of the German rightwing program."[4] He was forced to resign. Commentators draw the conclusion that "he had been sacrificed for the sake of Germany."
"Germany's Flawed Policy"
Prominent economists are also reinforcing French social resistance with their warnings about German austerity dictates. At their annual meeting in Lindau last summer, numerous Nobel Laureates for Economics sharply criticized Berlin's policy. "The introduction of the Euro has created a system of instability, with the consequences being the weaker states becoming still weaker and the stronger, still stronger," declared Joseph Stiglitz, 2001 Nobel Prize laureate.[5] "Youth in Spain and Italy" will suffer the consequences "for decades" warned 2010 Laureate, Peter Diamond. Berlin, "pursues a completely flawed policy in Europe," concludes Eric Maskin, 2007 laureate. "Its prescribed austerity plan will plunge the Euro zone into a depression."[6] In spite of German pressure, France is trying to avoid excessive budget cuts, out of fear that the lack of spending could provoke a dramatic crash or a deflationary spiral in France - as it had produced in Greece.
Pressure on Brussels
In late October, Paris and the EU Commission reached a compromise in their dispute over the implementation of the austerity dictates: The French government reduces its structural budget deficit and Brussels in turn permits France to lower its national debt under the official three-percent-limit only by 2017. France was hoping that with this delay it would have better chances to stimulate its economy. Berlin seeks to sabotage this compromise. After massive German pressure on Brussels, when, in a letter to EU Commissioner for Economic Affairs Pierre Moscovici on October 20, German Finance Minister Wolfgang Schäuble and Minister for the Economy Sigmar Gabriel demanded stricter budgetary controls, the German EU Commissioner Günther Oettinger has now placed an article in the French business paper "Les Echos," which was published last Friday, provoking strong protest in Paris.
Rigor toward Paris
In view of the fact that France will again surpass the three-percent-limit, Oettinger insulted France in a newspaper article by calling it "recidivist" - a term that is not among the standard repertoire of diplomatic language, to put it mildly. The EU Commission should show "rigor" toward Paris, Oettinger demanded. The steps the French government has taken so far "are not nearly enough." Paris must tackle "a whole series of problems" immediately, i.e. "reducing high labor costs and income taxes," as well as reduce the "increase in corporate taxes."[7] Without Paris taking "concrete and measurable steps," the EU Commission should not grant its approval today to the French budget. High-ranking diplomats in Brussels immediately chimed in declaring that renewed punitive measures against Paris are still in discussion, if Paris exceeds the deficit limit again. The compromise of late October is therefore endangered.
Resignation Demanded
Last weekend, Paris reacted strongly to Oettinger's newspaper column, which had been published with the knowledge of EU Commission President Jean-Claude Juncker. According to the press, ECB President Mario Draghi had at least been informed beforehand, of the contents and the article was supported by Eurogroup President Jeroen Dijsselbloem. Oettinger's "uncontrolled gaffe" oversteps his preogatives as EU Commissioner, declared PS General Secretary, Jean-Christophe Campadélis and demanded consequences. "Resignation" would be appropriate.[8] The power struggle continues. An EU Commission statement on France's national budget, originally scheduled for today, Monday, may have to be postponed a few days - because Berlin, as Oettinger's gaffe has made clear - would like to see far more drastic cuts in Paris' budget.
Other reports and background information on German-French relations can be found here: The Disengagement of France, Le Modèle Gerhard Schröder, The Agenda 2020, Descent into the Minor League, Under the German Whip (I) and Under the German Whip (II).
[1] See Das Spardiktat, Auf Kollisionskurs and Sarkozy, the German.
[2] See Le Modèle Gerhard Schröder.
[3], [4] See Under the German Whip (II).
[5] Der Euro muss weg für Europas Aufschwung. www.welt.de 21.08.2014.
[6] Nobelpreisträger rechnen mit Merkel ab. www.welt.de 24.08.2014.
[7] Günther H. Oettinger: Déficit français: Bruxelles ne doit pas céder. Les Echos 21.11.2014.
[8] Le dérapage incontrôlé du commissaire Oettinger mérite une démission. www.cambadelis.net 21.11.2014.
