Paris, August 16, 2011
THE PRESIDENT – Ladies and gentlemen, thank you. I’d like to begin by welcoming German Chancellor Angela Merkel. In a word, we’ve worked flat out, not just this afternoon but throughout the past few days, to present ambitious joint proposals. I must say that we, Germans and French, share similar views and a similar vision of the future.
We want to say how absolutely determined we are to defend the euro, to shoulder Germany and France’s particular responsibilities in Europe, and for Germany and France to have completely the same views and proposals on all these issues.
There are objective reasons for the situation we’re seeing, and then there are speculative rumours and decisions. We’re completely and utterly determined to fight them, just as we’re determined to put the whole Euro Area back on the path of growth. So we’ve decided on a number of joint proposals, which will be sent in a Franco-German letter to President Van Rompuy tomorrow morning.
FRANCO-GERMAN PROPOSALS/EURO AREA ECONOMIC GOVERNMENT/GOLDEN RULE/FINANCIAL TRANSACTION TAX
The first of these proposals consists in establishing a genuine economic government in the Euro Area. This economic government will comprise the Council of heads of state and government. It will meet twice a year, more frequently if necessary, and elect a stable president for two and a half years. Mrs Merkel and I are proposing Mr Herman Van Rompuy, if he puts himself forward, as this stable president.
Secondly, we’d like the 17 members of the Euro Area to adopt before summer 2012 the “golden rule”, which consists in the 17 member states writing into their constitutions the rule that annual finance acts must comply with a requirement to return to budget balance. It’s a commonsense rule which has to lead to a decrease in deficits and reduction in indebtedness.
As regards France, I said to the Chancellor that this rule had already been put to a vote in the National Assembly and in the Senate. There has to be a so-called “qualified” majority for it to be adopted in Congrès [joint session of the National Assembly and Senate]. Prime Minister François Fillon will contact all the necessary political forces from the majority and opposition so that everyone, facing their responsibilities, can in all conscience decide what they have to do in response to this requirement to return to budget balance. A number of key figures outside the majority have already made it known they were in favour of this rule being adopted.
If a consensus is possible then I’ll call a meeting of Congrès in the autumn. If a consensus isn’t possible, the French will judge, at the presidential election, those political forces who want a return to budget balance, and those who don’t.
Third proposal: in September, France and Germany, the French and German finance ministers will submit a joint proposal to the EU authorities on a financial transaction tax. This is a priority for us. (…)
Q. – (on introducing eurobonds)
THE PRESIDENT – The Chancellor and I have exactly the same position on eurobonds. Maybe I’ve explained things differently, but it comes down to the same thing. What would eurobonds do? They would offer triple A guarantees for the debt of all Euro Area countries. So that would mean guaranteeing the entire debt without having control of spending and debt creation. Eurobonds might be conceivable one day – but at the end of a process of European integration, not the beginning. You can easily understand that if everyone can assume debt freely in complete independence and ask others, i.e. the biggest countries in Europe, to guarantee it, what are we going to tell our peoples? People say to me that you’ve only to ban states that assume too much debt from doing so, but as things stand in European institutions we don’t have the democratic legitimacy to do that. It’s rather my impression that those people who are proposing that we rush headlong into the establishment of eurobonds are the same ones who proposed setting up the single currency without thinking beforehand about the harmonization of competitiveness and the establishment of economic governance. Eurobonds may eventually culminate a process of integration but they certainly shouldn’t precede it as this would seriously jeopardize the most stable Euro Area countries which have the best record now and would then find themselves committed to guaranteeing debts that they also couldn’t control. What we’ve decided seems to be much more productive: economic governance, a pact – the competitiveness pact –, harmonization of our economies, resolve to enhance competitiveness to promote growth – because growth is the key to everything; and we want written into constitutions golden rules to reduce the deficit, reduce indebtedness and restore confidence, without which there will be no growth. So that’s our response; it’s not ideological, it’s concrete and practical. If we were to say tomorrow that Germany and France are going to guarantee the debt of everyone without limits and conditions, what would our countries’ credibility be in six months? Have I made myself quite clear?
Q. – Are we to understand that at this point you’ve ruled out an expansion of the European Financial Stability Facility? Some economists have been talking about doubling the fund to reassure the markets.
THE PRESIDENT – I can see that there’s no shortage of advice, that the experts are stating their views as is only normal in a democracy, that everyone is giving advice. All the same, I’d like to recall that in recent months we set up a fund of €500 billion. This is definitely a considerable figure and it hasn’t been used up, far from it. And some people say we should just double it. I wonder why no one’s proposed tripling it? (…) It seems to us that the fund is sufficient, that the flexibility which has been provided for – especially intervention to recapitalize banks or in the markets – is sufficient, and that our commitment in saying that we’ll do what has to be done to defend the euro, in line with all the European institutions, is a message that everyone should and must clearly understand. We’re not ruling anything out, nor are we announcing anything. We’re convinced that the European monetary facility which Mrs Merkel and I wanted to see established a few weeks ago will be an appropriate instrument, in line with the independent authorities of the Central Bank, for addressing any speculative attempts and efforts to destabilize our currency.
EURO AREA/ECONOMIC OUTLOOK
Q. – A question for the Chancellor and the President if I may. In the present context, against this yardstick, how do you assess the latest economic figures in France and Germany in the second quarter? Are we to expect markedly slower growth in the future? Even a return to recession? Does the slowdown elicit political reactions in your respective countries at the level of the EU? And if there’s slower growth in the strongest countries in the Euro Area, what consequences would this have for the European stability facility?
THE PRESIDENT – Many of the developed countries were already heavily indebted before the economic crisis in 2008 and 2009. The present economic crisis has been of unprecedented severity, probably the worst in a century. A number of countries had to increase their deficit and debt in order to tackle the crisis, sustain growth and make up the staggering losses in tax revenues due to the crisis. And this year we found ourselves facing a debt crisis.
The debt crisis has created instability, and everyone knows that instability is not good for growth. So confidence has to be restored with debt sustainability programmes, i.e. debt reduction, deficit reduction, and a decrease in indebtedness. Like the Chancellor, I’m confident about the economic prospects for the Euro Area and the world. In the case of France, in the first half of 2011, growth was 1.4%. Next week the Prime Minister, together with the Economy Minister and Budget Minister, will announce a number of decisions that will show France’s absolute determination to meet our deficit-reduction commitments.
I’d also like to add, as the Chancellor said, that it was important for France to reform her pensions system and cut back public spending and the number of public-sector jobs. It goes without saying that this policy will be pursued. In this way confidence will be restored, global stability will be restored, and we’ll return to growth and therefore employment.
Q. – Do you want sanctions imposed on states that don’t apply the golden rule or fail to respect it after the fact? What type of sanction?
THE PRESIDENT – With respect to the Euro Area, if we want stability, if we want the Euro Area to advance and not come apart, it’s essential to improve competitiveness and harmonize our deficit reductions and level of indebtedness. And so if our proposal is adopted by the 17, all the Euro Area members will have to respect this rule. So let me say one last time, the euro has allowed us to make a lot of economic progress because we’re stronger together than alone. But the euro isn’t simply a set of rights, it’s also rules, duties, discipline, living together, and that means solidarity when things don’t go well, as well as respect for the rules. Consequently, if the rule is adopted by the 17, which the Chancellor and I would like, it will not be an optional rule but a mandatory one. Because if it’s simply an option then why should some countries in the Euro Area respect it when others could exempt themselves? And on what grounds would those who exempt themselves turn to those making efforts and say: sorry, we’re exempt from the rule, please pay for us now? And I say this thinking in particular of what our Spanish and Italian friends are doing at this point, since the Chancellor and I believe that the governments of those two countries have recently taken some extremely useful decisions for the credibility of the Euro Area. (…)./.