Berlin treads softly-softly on Macron over deficit

BERLIN: Germany is taking a softlysoftly approach to French President Emmanuel Macron’s use of government largesse to calm violent “yellow vest” protests, government sources say, as Berlin puts European stability above fiscal discipline.

A reluctance to criticize publicly contrasts with complaints about France from Italy whose populist coalition government is in a stand-off with Brussels over its own big-spending budget which includes a sharp spike in the deficit. “It’s good news that things are calming down. France is Germany’s most important partner and we have no interest in seeing it destabilized for the long term,” a senior German government source said.

Ministers have been urged not to stoke confrontation with Paris as Macron attempts to end mass demonstrations against his pro-business reforms, promising tax and spending measures for the lowest earners worth billions of euros (dollars).

“We don’t know how they’re going to pay for all this,” the government source said, but “we will hold back from talking about a budget slip. This is about the French public finances; it’s not for Germany to judge.”

Damping down fires Especially since the financial crisis of 2008, Germany under Chancellor Angela Merkel has prioritised tight budgets, with deficits held to well under the EU three percent of GDP limit.

Her governments have also slashed accumulated total debt, bringing it down towards the EU ceiling of 60 percent of GDP. They have not been shy of passing judgment on less stringent fellow EU members-such as Italy-and have opposed reforms to the 19-nation euro single currency that could mean more risk sharing between capitals. But for now Berlin’s larger concern is a political crisis across Europe that has been stoked by populist victories, including Britons’ 2016 vote to quit the European Union.

Italy, too, has been largely spared a wagging Teutonic finger this year despite its deficit-busting budget which the EU, in a first, rejected outright, insisting that Rome try again.

“We see it in France, we see it in other countries, we have an urgent responsibility to halt these populist movements in the European elections” next May, another government source said.

The tone from the European Commission has meanwhile been notably calm and understanding-unlike for Rome, as the Italian government has pointed out.

Overstepping the budget limit “can be envisaged in a limited, temporary and exceptional way,” Economic Affairs Commissioner Pierre Moscovici told France’s Le Parisien daily yesterday.

Italy’s Deputy Prime Minister Luigi Di Maio noted that a higher deficit “will create a French problem, after the Italian problem, if the rules are the same for everyone.” “I expect the Commission to open a procedure” that could lead to sanctions for excessive spending-as it has threatened to do in Italy’s case, he added.

Despite their public forbearance, German leaders are in private frustrated with Macron’s uphill struggle to push through reforms they see as indispensable. One senior official noted how the young president’s at times arrogant style has alienated parts of the French public.

And any weakening of restraint in French spending policy undermines Macron’s bet he could win German confidence by showing France could live within its means and reshape state finances. ‘More Renzi than Schroeder’ German economists greeted skeptically Macron’s emergency concessions to the “yellow vests” after repeated weekends of marches, barricades and violence around France. For example, an increase in the minimum wage “will not reduce social tensions in France, where the minimum wage is already so high that it hampers the employment of weaker groups in the labor market, especially young people,” said Clemens Fuest, head of Munich’s influential Ifo think-tank.

German newspapers, which last week celebrated the 50th anniversary of irrepressible Gaulish comic book hero Asterix appearing in the language, see a similar stubbornness in modern France’s resistance to its young president. For conservative Die Welt daily, Macron is “more of a Matteo Renzi”, whose recent premiership in Italy failed to secure much-needed reforms, than a Gerhard Schroeder-the chancellor whose policies are credited with reviving Germany’s fortunes after the moribund early 2000s.