Strong domestic stimulus is helping France shrug off a global slowdown even as export-dependent Germany heads closer to a recession, starkly divergent data on the euro zone’s two leading economies showed on Wednesday, reports Reuters.
France saw national output rise 0.3% in the third quarter - defying forecasts for slightly slower growth - as unemployment in Germany rose faster than expected and its chambers of commerce warned that exports would shrink next year for the first time since the financial crisis as trade friction mounts.
The contrast in national fortunes was underlined as incoming European Central Bank chief Christine Lagarde doubled down on her predecessor Mario Draghi’s calls on Germany to use some of its budget surplus to invest in growth-enhancing measures.
“Those that have the room for manoeuvre, those that have a budget surplus, that’s to say Germany, the Netherlands, why not use that budget surplus and invest in infrastructure? ... Why not invest in education, why not invest in innovation, to allow for a better re-balancing?” she told France’s RTL broadcaster.
German Finance Minister Olaf Scholz, who can expect 4 billion euros (£3.5 billion) more in tax revenue than initially predicted this year, rejected the impression that Berlin was not doing enough, pointing to record-high public investment levels.
“It’s clear that a lot of people expect a big investment push from us and that’s why I pointed out at the beginning that the federal budget already foresees higher investments,” Scholz said.
Scholz also showed no willingness to ditch Berlin’s balanced budget policy of no new debt and increase public investments through borrowing within the means of Germany’s constitutionally enshrined fiscal rules that allow a small budget deficit.
France’s economy, which has long relied more on domestic consumption than that of its northern neighbour, got a boost from President Emmanuel Macron’s injection of 10 billion euros in stimulus to quell the “yellow vest” protests this year.