lFrance is poorly placed to give lessons in budget management, with a deficit that is constantly being revised upwards, which should reach at least 5.6% of GDP this year. This is all the more unsatisfactory as the economic performance is very mediocre and the quality of public services is deteriorating.
Paradoxically, another country is not in a position to give lessons on budgetary matters in Europe: Germany, which is making the opposite mistake. The argument for presenting a major recovery plan has rarely been so clear. This is a stagnant country, with a structurally weakened economic model, but with healthy public finances (a deficit forecast for this year of 1.9% and a debt of 63%). This is a perfect textbook case for increasing public spending.
Politically, however, there is no doubt about it. Finance Minister Christian Lindner (FDP) refuses to loosen the purse strings. He carries the Constitution with him: in 2009, Germany made the regrettable mistake of introducing into its supreme law the obligation of a quasi-balanced budget, with a maximum structural deficit of 0.35% of GDP, except in the event of a recession. The government tried to circumvent the rule by creating separate funds, particularly for the green transition. The Constitutional Court banned this approach in November 2023. The situation is at a standstill and a two-thirds majority in parliament would be needed to remove the debt brake rule. Impossible in the current state of political forces.
Fall in imports
“This is a historic mistake, bothers Isabella Weber, an economist at the University of Massachusetts. This fiscal policy played a key role in the country’s mediocre economic recovery. [après la pandémie]. » Since the fourth quarter of 2019, German growth has been non-existent, at just 0.3%, far behind France (3.8%) and, especially, the United States (9.4%).
The absence of a recovery plan is all the more damaging given that the German economic crisis is not temporary. “There is a cyclical part, of course, but Germany has been stagnant since 2018, its productivity is not increasing, its demographics are in decline and there is chronic underinvestment in both the public and private sectors.”“This is compounded by the fact that key sectors are performing poorly, particularly the automotive industry, which is facing a difficult transition to electric vehicles,” says Nils Redeker, co-director of the Jacques-Delors Centre in Berlin, a think tank.
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