France continues to admire Germany

Stefanie Müller. Correspondent. Handelsblatt

21 February 2005

In times of crisis the French need the Germans more than ever.

“Germany can be proud of how it’s changed,” says Christian Boissieu, head of the Economic Analysis Council of the French government. During the conversation, he referred time and again to the importance of Germany for France and the key role it plays in Europe. “Without Germany or Europe, the French would be lost. We have not been a world power for some time now, even though some politicians prefer to ignore the fact.” Since the year 2000, the German government, with Gerhard Schröder at the helm, has managed to turn German society around. In the face of little social resistance, the social democrats have reformed the health system in such a way that today citizens have to contribute with payments that are much higher than four years ago. “In France, we’re much slower with everything,” Boissieu said. Thanks to the confidence his fellow citizens have in the French state, he also thinks it is basically very difficult to implement a change to bring about cutbacks in social services, as in Germany. “In France, there would be a riot,” he said.

According to Elie Cohen, one of the country’s leading independent economists, this also has to do with the fact that the French have a strong sense of national identity, “Nikolas Sarkozy is the best example we could give.” Cohen, who was advisor to the previous French Conservative Minister of Economy and Finance, is critical of the nationalist attitudes of politicians and the French elite in general. “They give the impression that France can still do what it wants, and yet we are in the middle of Europe and our economy has not been governed by French guidelines for a long time now,” the expert pointed out. He is also of the opinion that enterprise has progressed much further and has left behind its national outlook to compete in the global economy. The influence of politics grows less important by the day.

The popular book of economic historian Nicolas Bavarez, La France qui tombe (France in Free Fall), gives a similar view. “We are looking at a case of schizophrenia where on the one hand we want Europe and, on the other, we block her out,” Bavarez declares. There are two parallel societies: the political elite, who dream of a great nation; and the companies and young people of France, who took another direction some time ago. “More and more young French people study in the United Kingdom because the schools there prepare them better for global competition,” Cohen says. The economy also bade farewell some time ago to the government’s “national obssession”. Around 40% of the French stock exchange is held by foreign companies. Firms such as Alcatel did not think twice about moving their production to China because labour is cheaper there.

Although in recent years the Germans have watched admiringly as the French fuelled economic growth in their country by founding families that in turn were active consumers, in the long term things are panning out better for their German neighbour. “In the future Germany will have far fewer problems than us,” Boissieu says. The German economy still has a stronger industry, with companies like Siemens, MAN, Thyssen-Krupp, DaimlerChrysler and Volkswagen. The middle classes are much more widespread and consolidated than in other countries. They are also more specialised, especially in the machinery sector, which, according to the Medef business association of Paris, means that “in this field the Germans are leaders in Europe.” They also discovered the enormous, expanding Chinese market long before the French, and created a bridge between Europe and Asia.

France, on the other hand, will repeat, for the first time in many years, a deficit in its trade balance, while Germany continues to be the world’s leading exporter, despite the strong Euro. Made in Germany is still a seal of unbeatable quality,” Cohen says. Consequently, Jean Paul Fitoussi, head of the independent institute of economics OFCE (Observatoire Français des Conjonctures Économiques) calls on his country to wake up once and for all when he says “we need a workable growth policy and an active monetary policy; applying reforms is not enough.” The former head of the IMF, Michel Camdessus, has just presented the French government with a plan for growth which even goes so far as to change the inflexible French education system. Universities, too, must become independent research centres and work in close collaboration with private enterprise. Furthermore, Camdessus is in favour of a strong continuous training policy in his country, “the fact that someone has finished studies at a centre for higher education does not mean that they no longer need training.” He is also convinced that the pact for European stability will be reformed in such a way that it will enable an anti-cyclical financial policy, “which is the only way of guaranteeing sustainable growth.”

Medef and Boissieu also believe in creating more European giants, large transnational companies which through mergers and acquisitions can become leaders in the global market. According to Cohen, “in this context, the Germans, with their extensive technical know-how, should be given preference.” In Germany, the positive valuation of their economic and political success has come as a surprise. One is usually more critical of oneself than of others, and economy and consumerism are currently affected by doubt and uncertainty. “We should be encouraged by the fact that a country as strong as France still admires us,” says Henrik Uterwedde from the French-German Institute of Ludwigsburg. He also believes that France’s admiration could be taken further. He feels that both countries should collaborate to a greater extent in order to create veritable European giants that will equip the continent to stand up to the United States.

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