August 7, 2020

Bundesbank President Says France Needs to Control Its Deficit

FRANKFURT — The head of the German central bank said Monday that France should not give up trying to bring its government deficit below 3 percent of gross domestic product, adding to the criticism being heaped on President François Hollande of France from abroad.

Jens Weidmann, president of the Bundesbank, cloaked his rebuke in the language of French-German solidarity and was considerably more diplomatic than Maurice M. Taylor Jr., the head of the American tire maker Titan International, who sparked a furor last week when he told the French industry minister that French workers were lazy.

Still, Mr. Weidmann was the latest prominent person to lecture the increasingly defensive French on how they should manage their economy.

Speaking in Paris at the École des Hautes Études Commerciales, a leading business school, Mr. Weidmann noted that unemployment in France was above 10 percent while France’s share of world exports had declined by 25 percent since the euro made its debut. Total government debt “has reached a level that could potentially hurt growth,” Mr. Weidmann said.

France would undermine confidence in its prospects if it delayed efforts to control deficit spending, he said.

“Putting consolidation off would just shift the problem into the future,” Mr. Weidmann said, according to an advanced text of his remarks. “It would buy time but in so doing also worsen matters today as there is the risk that trust in public finances would erode even more.”

The tone of Mr. Weidmann’s speech was polite and even included a joke at Germany’s expense. (“How many Germans do you need to change a light bulb? One: he holds the light bulb, and the rest of Europe revolves around him.”)

Mr. Weidmann invoked the durable, if sometimes contentious, relationship between France and Germany, which has always been crucial to the functioning of the European Union. “Only together can France and Germany solve the current crisis,” he said.

But he said that the largest countries in the European monetary union had a responsibility to set an example for other members. “It is in my view particularly important for the heavyweights in E.M.U. to give clear signals,” he said.

France’s government budget deficit will be 3.7 percent of gross domestic product this year, while Germany will have a slight surplus, the European Commission forecast last week. When European countries formed a common currency, they agreed to keep their deficits below 3 percent of G.D.P., though the target has often been breached.

Mr. Weidmann acknowledged that budget austerity might hurt growth but said countries had no choice. “It is important that governments adhere to the consolidation plans they announced,” he said. “This will inspire confidence, which is an important prerequisite for the economy to grow.”

He rejected suggestions by Christine Lagarde, president of the International Monetary Fund and the former economics minister of France, that Germany should somehow become less competitive to give other countries a chance.

“The deficit countries must act,” Mr. Weidmann said. “They must address their structural weaknesses. They must become more competitive, and they must increase their exports.”

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