The simmering stew between Germany and France boiled over again this week as German Central Bank Head Blasts France.
France needs more time to get its budget deficit under control. That much was made clear last Friday when the European Commission announced it was granting Paris until 2015 to bring its budget deficit below the maximum 3 percent of gross domestic product allowed by European Union rules ensuring the stability of the euro.
But on Wednesday evening, Jens Weidmann, the president of Germany’s central bank, the Bundesbank, said he is adamantly opposed to the move. “You can’t call that savings, as far as I am concerned,” he told the daily Westdeutsche Allegemeine Zeitung in an interview. “To win back trust, we can’t just establish rules and then promise to fulfil them at some point in the future. They have to be filled with life,” Weidmann said.
France had originally hoped to reduce its budget deficit below the 3 percent limit this year, but with its economy suffering, the deficit is likely to be closer to 4 percent and slightly higher in 2014.
Immediately following the announcement from Brussels, French Finance Minister Pierre Moscovici said that Paris planned to scale back its austerity measures. “We don’t want excessive consolidation for our country, we don’t want austerity beyond what is necessary,” he said.
Expect Budget Failure in 2013, in 2014, in 2015
With socialists in complete control of France, especially with Francois Hollande at the helm, do not expect France to meet its deficit targets this year, next year, or in 2015.
Indeed, given that French presidential terms are 5 years in length, it may be quite some time before France shows any economic improvement at all, let alone be able to meet terms of the eurozone treaty.
Mike “Mish” Shedlock