Schaeuble Voices Understanding for France’s Deficit Struggle

German Finance Minister Wolfgang Schaeuble indicated he’s willing to grant France fiscal breathing space as President Francois Hollande seeks more time to meet European budget deficit targets.

Sitting next to his new French counterpart, Michel Sapin, at a press conference in Berlin today, Schaeuble said the two countries depend on each other and Germany needs a “strong” France at its side. Sapin said debt reduction requirements must be balanced against the need to boost economic growth.

“We can only adhere to rules if everybody adheres to the rules,” Schaeuble said. Even so, Germany recognizes that other countries are making an effort and “there are times when it’s easier for some and somewhat harder for others.”

France’s deadline for reaching the euro-area deficit limit of 3 percent of gross domestic product, enforced by the European Commission, has already been postponed twice, most recently in September. Any further delay needs the political backing of Germany, Europe’s biggest economy.

Sapin said he informed Schaeuble of the French government’s moves to cut the deficit and improve competitiveness. France’s plans are convincing, said Schaeuble, noting that France is aware of its responsibilities in reducing euro region budget deficits.

“We all need to devote our energies to ending the crisis,” Sapin told reporters. “That means respecting our commitments but it also means reviving growth. It’s the balance between the two that will allow our country to recover.”

Budget Deficit

The French government in September vowed to cut the deficit to 3.6 percent of GDP this year and 3 percent in 2015. Last year the shortfall was 4.3 percent rather than the 4.1 percent to which Hollande had committed.

Dutch Finance Minister Jeroen Dijsselbloem has urged France to stick to its deficit-reduction plans, signaling his opposition to Hollande’s bid to loosen austerity moves. European Union Economic Affairs Commissioner Olli Rehn said giving France extra leeway would set a bad example.

Political pressure is building on Hollande from within his Socialist Party after a rout in municipal elections a week ago that prompted a cabinet overhaul. Hollande responded by saying he would press ahead with cuts in payroll charges for business in a bid to revive competitiveness and growth.

“What’s at stake politically is significant,” Sapin said, noting the defeat in the municipal elections mustn’t be ignored. “We need to succeed economically, technically and financially, but also politically.”

To contact the reporters on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net; Mark Deen in Paris at markdeen@bloomberg.net

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net Leon Mangasarian, Tony Czuczka

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