Japan in Their Own Words (JITOW)/日本からの意見

Calling on Germany to Provide a Fiscal Stimulus to Help France and Secure the System of Free Trade and Open Markets
NISHIKAWA Megumi / Journalist

August 1, 2017
In the French parliamentary elections held in June, 60 percent of the seats were won by President Macron’s new party, the Republic on the Move, and its allies. Now, with a solid power base, the Macron administration has the golden opportunity to embark on domestic reforms that have remained stalled for many years. Germany’s Chancellor Merkel should back this move by reversing her government’s ongoing policy of austerity and instead expand spending on areas including public projects. Such a policy shift would ultimately lead to safeguarding free trade and open markets.

President Macron has vowed to protect free trade and open markets, and to lead the European Union (EU) in partnership with Germany. At home, he will seek to liberalize the labor market to revitalize the economy and lower the consistently high unemployment rate. Macron is on the right track.

For France, the prolonged economic slump has meant a decline in its political leadership within the EU. And that in turn has changed the very nature of the EU. French labor unions wield enormous authority, making it virtually impossible for companies to lay off workers. For this reason, companies are extremely cautious about hiring, which has been a factor behind the 20 percent unemployment rate among young people. In light of the robust economies enjoyed by Germany and other countries, it was clear that France also needed to reduce government interference, deregulate, and introduce competition to raise mobility in its rigid labor market. Previous governments did not just sit on the sidelines, but each effort at reform had fallen flat as labor unions budged in with mass street demonstrations.

President Macron is different from the elites of the past. While the French elite would ordinarily build their careers by moving from one state enterprise to another, Macron was an investment banker handling M&A deals in a global company exposed to intense US-style competition. And it was this experience that convinced him that the key to revitalizing the economy lay in ensuring free trade, open markets and liberalization of the labor market. As the Minister for the Economy, Industry and Digital Affairs under the Socialist government, he successfully pushed through regulatory reforms known as the Macron Law. Allowing shops to stay open on Sundays and liberalizing long-distance bus services were baby steps for Macron, but even these reforms were met with stubborn opposition from the party ranks. Realizing the limits to pursuing further reforms within the framework of an established party, he was motivated to leave the Socialist Party and set up a political party of his own.

Now is the time for Chancellor Merkel to reverse her austerity policy and boost various investments including public investment as a way to provide indirect support for President Macron’s reforms. Labor mobility will cause a temporary rise in unemployment and bring down wages, creating the need to prop up the economy with means including a fiscal stimulus. However, under EU rules, France has no room to expand its budget deficit. And so President Macron has proposed a common budget for the EU, in the hope that countries such as Germany would contribute to that budget, which will then be invested throughout the region to revitalize the economy. Aside from whether it should join such a scheme, there are plenty of reasons why Germany should boost public investment to support President Macron. Should fickle public opinion turn against Macron and bring down his reforms, it will have a grave impact on Germany as well as the EU as a whole. Now is the time for Chancellor Merkel to demonstrate the strength of the Franco-German partnership by taking action.

The world would also benefit. During the G20 summit meeting held in Hamburg, Chancellor Merkel repeatedly emphasized the importance of free trade and open markets. However, to maintain this system, Germany should not stash away its trade surplus, but let it circulate through public investment. That will lubricate the system of free trade and open markets, enriching many countries through their mutual transactions. And that in turn will present an ideal antithesis to selfish protectionism.

A virtuous cycle is currently at work for the supporters of free trade and open markets. In addition to the emergence of President Macron and the electoral victory of his party, Japan and the EU have agreed on an overall framework for their Economic Partnership Agreement. I hope Germany will take the bold step of expanding public investment to provide a further boost to the cycle.

Megumi Nishikawa is Contributing Editor for the Mainichi Shimbun newspaper.
The English-Speaking Union of Japan

西川恵 / ジャーナリスト

2017年 8月 1日







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English Speaking Union of Japan > Japan in Their Own Words (JITOW) > Calling on Germany to Provide a Fiscal Stimulus to Help France and Secure the System of Free Trade and Open Markets