French Ministers Visiting Berlin to Reassure on Budget

France’s finance and economy ministers fly to Berlin today to try to convince their German counterparts of their plans to improve competitiveness and to press for more investment.

“There is a desire for a deal in which we’re making reforms because it’s good for us to boost our growth potential,” Economy Minister Emmanuel Macron said on RTL radio late yesterday. “In exchange, and that’s the good deal, the Germans, reassured by our work, would be able to invest for themselves, and would help us promote a real investment plan in Europe.”

Macron and Finance Minister Michel Sapin will meet this afternoon with Germany’s Wolfgang Schaeuble and Sigmar Gabriel, underlining President Francois Hollande’s effort to garner support for France’s rising budget deficit at a time when the euro-area recovery is stalling. Obtaining backing from Chancellor Angela Merkel’s government is key as the European Commission studies France’s 2015 budget plan this week and next.

The two French ministers will urge their German counterparts to invest an additional 50 billion euros ($63.8 billion) over three years to match 50 billion euros in French spending cuts, Frankfurter Allgemeine Zeitung said, citing an interview with Sapin and Macron in Paris.

While Schaeuble said in an interview with the Welt am Sonntag newspaper that criticism of a German investment shortfall is “quite justified,” he upheld the ruling coalition’s goal to balance the budget next year. Gabriel told mass-circulation Bild-Zeitung today that Germany will spend more on infrastructure investments without raising debt.

EU Backlash

France’s failure to comply with deficit rules it helped write is drawing the ire of countries like the Netherlands and Austria, which are calling on Hollande to act. Macron last week announced a range of measures to “free up activity,” ranging from easing Sunday shopping restrictions to faster settlement of disputes between companies and employees.

At a meeting of euro-region finance ministers in Luxembourg last week, France’s plea for patience on the budget deficit got a frosty reception.

“Based on the numbers we’ve heard up to now, the gap between what should be achieved based on the rules and the budget that’s expected is very big,” Dutch Finance Minister Jeroen Dijsselbloem told reporters before the meeting. “With all respect for France, this gap must be reduced.”

Wider Gap

France sees the deficit rising to 4.4 percent of gross domestic product this year -- the first increase in five years - - and barely improving to 4.3 percent in 2015. The shortfall won’t shrink to the EU limit of 3 percent of GDP before 2017. That’s two years later than the extended deadline set down by the Commission.

“The rules of the game should be the same for everyone -- France has a very special responsibility here,” Austria’s Finance Minister Hans Joerg Schelling said. “Just like Austria, all the other countries have to do their homework.”

Using powers bolstered at the height of the debt crisis, the Commission, the EU’s executive wing, can force France to revise the plan if it deems that the country is making insufficient progress in shrinking the deficit.

Before it's here, it's on the Bloomberg Terminal.