French Prime Minister Manuel Valls insisted on the importance of reducing public deficits at the employers Summer University last week, hoping to reassure Germany over France’s mounting debt. EURACTIV France reports.
Manuel Valls’ speech to French employers, gathered at Jouy-en-Josas for the Medef Summer University, did not bypass the point of contention: the economic and budgetary policies in France and the Eurozone, and the role of Germany.
The Socialist-led majority is divided on whether to pursue austerity policies in order to comply with European fiscal rules, leading to the expulsion of two prominent ministers opposed to the further reduction of deficits.
Hand extended to Germany
At Jouy-en-Josas, Valls reiterated the importance of the Franco-German partnership before an audience of French business leaders and entrepreneurs. “More than ever, Europe needs strong, durable and productive cooperation between France and Germany,” he said, rejecting any “ridiculous confrontations with Germany”.
The statement was clearly aimed at putting an end to the dispute raised by the outgoing Minister of the Economy, Arnaud Montebourg, who accused Germany of being “obsessed” with reducing public deficits in Europe.
The day after a reshuffle that leaves the new government looking distinctly more liberal, Manuel Valls wished to recall the important role of investment in revitalising the anaemic growth of the Eurozone, with particular attention to the recent declarations of the head of the European Central Bank.
“As Mario Draghi pointed out to Jackson Hole last week, we can make European budgetary policy more favourable for economic growth” the Prime Minister affirmed.
Recalling the commitment of the new President of the European Commission, Jean-Claude Juncker, to an investment plan worth 300 billion euro over three years, Manuel Valls called upon the European Commission to define its scope as well as to “make commitments to public and private investment.”
Reducing the deficit
Despite advocating boosting the economy through investment, the Prime Minister firmly recalled France’s European budgetary commitments.
“There should be a reduction of public deficits in Europe and particularly in France,” he stressed, clarifying that although the clean-up of public finances is necessary, it “should be adapted to the current economic situation”.
“This is not about shirking our responsibilities by demanding changes in the rules, by letting the debts pile up, by exempting ourselves from the necessary reforms, or even by pointing the finger at Germany. This is about dealing with the issues before us today: the weakness of inflation, the absence of economic growth despite the fact that this crisis is now 6 years old. These are exceptional circumstances,” he continued, explaining that “creating austerity” would “place the European project in danger”.
European governments will present their budget plans for 2015 to the European Commission in October. The EU executive will judge the progress they have made with reforms according to their own economic forecast, which will be published in November.
Without economic growth, France will be unable to reach its objective of reducing its deficit to 3% by 2015, and will probably be forced to negotiate a new time-scale with the European executive.
Commission remains vigilant
The European Commission has welcomed the willingness of the new French government to pursue structural reforms and would even like to see them accelerated to boost growth.
The day after the reshuffle, Simon O’Connor, spokesman for the European Commissioner for Economic and Monetary Affairs, Jyrki Katainen, declared that “there is no time to lose”.
“It is important that the Prime Minister has confirmed his government’s intention to maintain its reform commitments,” he added during a press briefing.
Reforms are “essential for France to sustainably relaunch growth and employment,” the spokesman continued. “It is imperative that France, and not just France but other countries that are in a similar situation, accelerate their structural reforms.”
Speaking out for nuclear power
Finally, the Prime Minister did not miss the opportunity to affirm his support for the French nuclear sector, at a time when the National Assembly is due to examine the proposed bill for a green energy transition.
“I believe, now more than ever, that the nuclear sector has a great future in our country,” Valls maintained.
The energy transition bill allows nuclear power to retain an important share of the market. The proportion of electricity generated in nuclear power stations is set to fall from 75% to 50% by 2025.
The left wing of the Socialist Party has been very critical of the French government's economic policy since last spring.
The Minister of the Economy, Arnaud Montebourg, has acquired the tendency of castigating European policy on both competition and monetary matters.
Governmental cohesion was seriously called into question by the deep splits within the Socialist Party regarding economic policy, and the Prime Minister Manuel Valls was forced to form a new government on 26 August.