An economic policy dispute between France and Germany threatens to distract the eurozone as it faces fierce competition from Asian rivals, analysts and German media warned Tuesday.
Barbed comments have been voiced in recent days over how eurozone economies should tackle global competition and internal trade, with Germany defending its drive for labour reform and exports against charges it neglects consumption.
French Finance Minister Christine Lagarde got the ball rolling Monday when she questioned German economic policy, suggesting its hefty trade surplus was a burden for eurozone partners.
German Economy Minister Rainer Bruederle hit back on Tuesday.
“For countries, which in the past have lived off entitlements and neglected their competitiveness, to point their finger at others is politically… understandable, but still unfair,” he told the Frankfurter Allgemeine daily.
Berlin’s finance minister later sought to defuse the latent spat between the top eurozone economies.
Wolfgang Schaeuble professed a “friendly and trusting” working relationship with Lagarde and said he had expressed his viewpoint with a football metaphor.
Schaeuble told Lagarde he was a fan of German football giants Bayern Munich and acknowledged they had played poorly against French side Olympique Lyonnais.
“It would have been easier for Bayern if Lyon had played worse. But this is not how competition works,” Schaeuble noted.
Etienne Francois, a history professor at the Free University of Berlin, told AFP Lagarde’s remarks underscored “the fact that Germany has succeeded where France has not,” in controlling production costs.
Amid the squabbling and football anecdotes, analysts warned Europe was forgetting competitors in Asia.
Goldman Sachs economist Erik Nielsen went there last week and said investors had told him “it is not clear that Europe fully understands the rise of Asia and is ready to compete in the new globalised economy.”
ING senior economist Carsten Brzeski told AFP the eurozone would have to settle its differences to compete on the world stage.
“If the eurozone really wants to become a functioning economy, these issues will have to be discussed and they will have to be solved at the eurozone level,” he said.
UniCredit chief economist Marco Annunziata warned eurozone countries faced “an increasingly fierce global competition which is not going to disappear.”
He added: “Countries which have experienced very poor productivity growth and relatively fast wage increases over the past few years cannot simply blame German frugality for their problems.”
Higher wages in Greece, Portugal and Spain have weakened their ability to compete, while German workers have accepted wage moderation to preserve jobs.
Europe’s Energy Commissioner Guenther Oettinger, a German, urged Europe to follow that path.
“To turn back on such reforms would be to head in the wrong direction,” he told the Sueddeutsche Zeitung.
While Lagarde attacked Berlin’s policies for indirectly harming neighbours, she also last week revealed that Germany had become the leading source of job-creating investment in France, with 18 percent of all projects.
Another reason for Germany’s improved position is that it has outsourced much of its production to eastern European countries.
Free University professor Francois was surprised Lagarde chose a “public space” like the Financial Times’ front page to air her views, noting “that is rather unusual.”
He thought tough regional elections faced by the current French government might be one reason.
Much of the German press took Lagarde’s comments on board in part meanwhile, though Die Welt exclaimed “It would be the French!
“Germany has done a lot in the last 10 years to become more competitive and Europe will not become more successful if its best student gets worse so the others don’t appear so weak,” the daily said. Hard money training.
Tags: berlin's finance, europe, eurozone economies, german economy
