(Bloomberg) -- France and Germany attempted to paper over disagreements on the urgency of fiscal stimulus to reboot the struggling euro-area economy, saying they have at least agreed on a “strategy for growth.”
In a statement after a meeting of French and German finance chiefs in Paris, the two sides said they agreed to pursue structural reforms, cut debt where necessary, and carry out “strong public investment” where possible. But speaking after the meeting, French Finance Minister Bruno Le Maire said the euro area's two largest economies were still divided over how quickly they should take action.
“I recognize that Germany has started spending more money, but on the timing we still have a debate,” Le Maire said. “Germany is ready; we still think it might be necessary to activate this strategy now.”
There is growing impatience in Paris for Berlin to rethink its economic policy as growth in the euro area slumps and hopes for an improvement fade.
For months, Le Maire has been proposing a growth accord for the euro area, according to which Germany and other countries with budget surpluses would unleash fiscal stimulus, while those with higher debts and deficits--like France--would continue with consolidation and reforms to boost growth potential.
France already has less room for maneuver after President Emmanuel Macron loosened the purse strings earlier this year to appease the Yellow Vest protests.
German Finance Minister Olaf Scholz said that the main reason for economic weakness in Europe is the disruption in global trade and that the priority should be unwinding the tensions and improving relations between the U.S. and China. Germany already has an expansive fiscal policy, he added.
“We have the highest-ever level of investment in absolute terms in our budget and that will continue in coming years,” Scholz said.
France isn't alone in pressuring Germany to go further. The International Monetary Fund, the U.S. administration, and the European Central Bank all have urged Berlin to do more. When the ECB announced a package of monetary stimulus last week, President Mario Draghi said it is “high time for fiscal policy to take charge.”
Earlier Thursday, the Organization for Economic Cooperation and Development cut its global growth outlook to crisis-era lows, and halved its German 2020 growth forecast to just 0.6%. It echoed calls for fiscal policy to play a bigger role to avoid an entrenched economic weakness.
To contact the reporters on this story: William Horobin in Paris at whorobin@bloomberg.net;Birgit Jennen in Berlin at bjennen1@bloomberg.net
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Raymond Colitt
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