Franco-German Stimulus Paris Plumps for Growth

A strategy paper from the French prime minister’s office is calling for a billion-euro investment program to bolster Europe’s flagging economy.
Four ministers to save Europe?

In France, an early bird doesn’t merely get the worm. Instead, a saying in La Grande Nation proclaims that the world belongs to those who get up early.

The consulting institute France Stratégie, which falls under the purview of the prime minister’s office, has apparently taken the saying to heart and presented recommendations for a billion-euro European investment program.

It is recommending projects that “strengthen the supply side in the medium term, trigger a demand effect in the short-term, and which relate to a small number of key sectors.” The countries should bear the “residual risk of the investments,” to encourage the private sector to initiate projects quickly.

German economics minister, Sigmar Gabriel, and his French counterpart Emmanuel Macron, as well as both countries’ finance ministers, Wolfgang Schäuble and Michel Sapin, want to announce a European investment and growth offensive at the beginning of December.

Henrik Enderlein, who directs the Jacques-Delors Institute in Berlin, and Jean Pisani-Ferry, the head of France Stratégie, are working in collaboration with the four ministries to prepare recommendations. They hope to present them to the public on November 27 in Paris.

What France-Stratégie has already released is also likely to be included in the German-French paper: Fabien Dell, one of the authors, is a good friend of Jean Pisani-Ferry, was an economic adviser to the prime minister and is now working in the cabinet of the French European Commissioner for economic and financial affairs, Pierre Moscovici.


Investments in Germany-France-USA-OECD-average-Nov3-2014


France-Stratégie is taking pains not to recommend a conventional stimulus program. The goal of the investment program should be much more about “strengthening the potential for growth in the medium-term,” namely the foundation for improving economic growth without inflationary pressures.

In light of Europe’s ailing economy, it would also depend on taking into consideration the short-term effects of the economic activity.

The French warn against harboring illusions here. Even if projects were already prepared, investments in infrastructure have a lead-time that is much too long to be realized quickly. They argue that it would be different for the modernization of already-existing infrastructure. They would also have “a considerable effect on the potential for growth,” but are much quicker to get started.

They specifically recommend building renovations, as well as improvements in the energy, telecommunications, education, research and development and innovation sectors.

The undertakings should not be financed solely by public or private means, but state development banks, such as Germany’s KfW or the BPI in France, should be used in order to mobilize abundant private capital. Therefore, according to the study, it would make sense to secure the remaining “residual risk” from the investments through public authorities or institutions. That could be done through subsidies or investments.


Thomas Hanke is Handelsblatt’s Paris correspondent. To contact the author: [email protected]