These days, Emmanuel Macron must appreciate foreign press reviews. A few weeks ago, The Economist hailed France’s “hidden successes”. From now on, it is another prestigious weekly, Der Spiegel, which compliments French economic policy. Economic journalist and correspondent in Brussels, Michael Sauga highlights the reversal of dynamics between Germany and France. While our neighbors across the Rhine realize that the economic miracle initiated in the early 2000s is coming to an end, with growth at half mast, the French government has, according to them, been able to carry out courageous reforms, by lowering business taxes, by promoting our attractiveness and raising the retirement age. Entitled not without provocation “France is Germany but better!”, the chronic has already caused quite a stir in France. For L’Express, Michael Sauga explains why he praised Emmanuel Macron, whom he compares to the reformist Gerhard Schröder of the early 2000s, and analyzes German difficulties.
L’Express: The Economist praised France’s “hidden successes” a few weeks ago. But for the most famous German magazine to compliment the French economy is something else again…
Michael Sauga: It’s the data! I read the Ernst & Young analysis which salutes the “remarkable dynamic” caused by Emmanuel Macron. I looked at the figures on foreign investment. The IMF also predicts that French growth this year and next will be more than double that of Germany. But this is also the opinion that prevails in Brussels, where I work.
In the German press, often very chauvinistic, we mainly mentioned the demonstrations against pension reform or the urban riots in France. We like to present Macron as a sort of cross between Louis XIV and Margaret Thatcher, an arrogant leader who alienated his population. But economic data shows a somewhat different story, even as discussions of German decline rage in my country.
Isn’t the title of your column, “France is Germany but better!”, exaggerated?
International companies are currently investing more in France than in Germany, even in sectors that until recently were considered German domains, such as the automobile industry. I also think that the French government has been able to act to solve problems, unlike the German government. Take the pensions. Germany has done nothing for years, even though all the experts say we urgently need reform. Macron had the courage to carry out this reform and to remain faithful to his ambitions, despite his unpopularity. It reminds me of the reforms carried out by Gerhard Schröder when he was chancellor. At the time, in Germany, it was also said that Schröder was arrogant, that he had lost the link with his population, that he did not know how to communicate his reforms. The reactions were the same as today in France.
There has been a lot of talk in France that Germans retire between the ages of 65 and 67. But in reality, since a relaxation of 2014 led by the Social Democrats, departures are often earlier…
The German pension system is almost as complicated as yours (laughs). But since this relaxation, you can retire two years earlier, under certain conditions. Surprisingly, a significant portion of German seniors used this clause. Every year, 260,000 people retire two years early. At the same time, qualified labor is becoming increasingly scarce. However, studies show that it is the good salaries and qualified workers who retire early, and not the less qualified, as the government initially planned.
“His popularity has collapsed, but France’s appeal has increased,” you write about Emmanuel Macron…
Reforms may seem harsh in the eyes of citizens. But from an investor and business perspective, Macron did the right thing. I think we can still mention it from time to time.
“It is clear today that the French strategy, based on nuclear power, is much better”
At the diplomatic level too, you believe that Emmanuel Macron has taken the upper hand, whileOlaf Scholz is much further behindlike Angela Merkel before him…
This trend actually started long before Scholz, already under Merkel. Traditionally, there was an economic division between Germany and France. The first favored the free market for medium-sized companies, while in France, there was much greater involvement of the State in economic choices. But in Brussels, in recent years, opinions have evolved, and we now find a much more French style in economic philosophy. There is much talk of European “strategic autonomy”, a concept promoted by Macron.
In terms of energy, has France made better choices than Germany?
The exit from nuclear power decided by Germany is the direct consequence of an even greater error: thinking that Russian gas was the right source of energy to lead the energy transition towards a system without CO2 emissions. This was a miscalculation on the part not only of Merkel’s government, but of the entire German population, and in particular the business community. We thought we could count on Russian gas forever. But the war in Ukraine completely changed the situation.
It is clear today that the French strategy, based on nuclear power, is much better, given this new geopolitical context. The debate is lively in Germany, because nuclear power is a very emotional subject here. But from a European point of view, we see that countries which were as opposed to nuclear power as Germany are changing their minds and want to join the nuclear group led by France, like the Bottom, from Sweden, or maybe even Italy.
Is Germany again the “sick man” of Europe, as asked The Economist ? Or is it simply a cyclical crisis linked to the war in Ukraine and the slowdown of the Chinese economy, knowing that your country is much more dependent on exports?
What you say is true. Germany has been the winner of the geopolitical and economic landscape of the past twenty years. It has greatly benefited from globalization, Chinese growth, low interest rates and exchange rates. All this benefited us. But this favorable context has also made us forget deeper problems for the German economy, starting with the aging of the population. France has a more favorable demographics due to a higher fertility rate. Today, many elements are unfavorable for the German economy. We need to change many things. For some Germans, it seemed that growth and economic success were automatic, and that there was no need to work to maintain them. This was an illusion not only on the part of the government, but of all German society.
In the cover file of this week’s Spiegel, you point out that this may be the beginning of a significant deindustrialization for Germany…
Faced with problems, Germans are starting to look to the past and say “ah, the period between 2005 and 2019 was a glorious time”. In their eyes, it would suffice to return to it, without changing the industrial structure of the country. But I think that’s a mistake. The real answer is to move forward, decarbonize more and invest in new products and sectors. Thinking that it would be enough to preserve our old industries is not the right strategy.
“Unlike Macron, Merkel probably took too much into account of the polls”
Your GDP per capita is 20% higher than that of France, and your public finances are much healthier. Isn’t it always comfortable to be in Germany compared to France?
Of course. Germany still has many advantages. But for several years, companies have been well aware of the problems. On the other hand, both the general population and the government are deluded about the real situation of our economy. As journalists, we must paint a realistic picture of the situation. Calling Germany a “sick man” is an exaggeration, but all our economists, left and right, agree that there are significant structural problems. They do not agree on the strategy to get out of this, but it is clear that our competitiveness is in crisis.
In France, the German parliamentary system, based on compromise, is often praised, in opposition to a much more personalized and vertical French governance. But today, the ruling coalition seems powerless, as the far right explodes…
Indeed, the “traffic light” coalition seems dysfunctional. So far, she has tried to downplay the difficulties, insisting that it is only a problem stemming from exports. For the first time, Chancellor Scholz has finally recognized that Germany was facing major problems, and that a national program involving the opposition would be needed to overcome them.
The German system has many advantages. Especially because it is based on a consensus between trade unions and companies, which is essential in the German model. But, in some cases, a more vertical system may have other advantages. I must say that I am impressed by the way Mr. Macron weathered all these political storms, staying on course. Even in a democracy, sometimes you have to stick to your ambitions and your strategy. Conversely, Angela Merkel has probably taken too much account of the polls…
Have you had any reactions to your column? In France, she made a lot of noise…
A lot. Some congratulated me, others replied that France will never compete with Germany (laughs). But I didn’t think it would provoke so many reactions in France. Sometimes it can be helpful to have a different perspective from a stranger. In Germany, The Economist’s cover calling Germany a “sick man” was a wake-up call. This is one of the advantages of Europe. We can share our points of view.