Is budgetary discipline so dear to the Germans about to fall?
The idea of relaxing the golden rule on controlling public deficits is back in the debate across the Rhine at the start of the year.
Read also: Debt, taxes, bureaucracy ... The hidden face of the crisis
In an interview with the German press on Tuesday, the head of the chancellery - the highest official of the federal chancellery - Helge Braun advocates an amendment to the German Constitution on the structural deficit to allow temporary exemptions to the brake on the indebtedness in the years to come.
Written into the Constitution since 2009, the rule normally prohibits the federal government from borrowing more than 0.35% of its GDP.
A sustained move away from limiting deficits is a "
strategic decision for economic recovery
", as well as providing a "
reliable framework for investments
".
This will also avoid raising social security contributions "
by the end of 2023
" and proceeding to "
tax increases
, ”adds Angela Merkel's right-hand man.
Is this stance the sign of a revolution in mentalities across the Rhine?
Nicolas Goetzmann, head of macroeconomic strategy at the management company La Financière de la Cité, answers questions from
Le Figaro
.
LE FIGARO- What is the debate across the Rhine?
NICOLAS GOETZMANN-
Budgetary balance is a principle of constitutional value
across the
Rhine.
The golden rule according to which “
income and expenditure must be balanced
” is in fact enshrined in the fundamental law of the Federal Republic (Art 115).
It was reinforced in 2009 by the “
Schuldenbremse
”
law
(“
debt brake
”), voted by the right (CDU / CSU) and by the left (SPD).
Chancellor Angela Merkel distanced herself from the chancellor's remarks, explaining that the CDU would continue to line up behind budgetary austerity
The relaxation of the rules, mentioned in this period of Covid-19, is above all a political question in Germany.
The discussion has gathered momentum in recent months.
She will be present for the German federal elections next September, with different wishes depending on the political parties.
However, even within the CDU, the majority party, negative reactions were already raining down after the words of the head of the chancellery.
In the morning, Armin Laschet, Mr. Budget of the party, explained in particular that the CDU would continue to line up behind budgetary rigor.
The newly elected CDU president said Helge Braun had simply expressed a "
personal opinion
".
A few later, Chancellor Angela Merkel also distanced herself from the words of the head of the chancellery, saying that her "
personal opinion
" was not at all that of the party.
In normal times, however, it is rare for Helge Braun to speak on these subjects without the approval of the German Chancellor.
Would this have historical significance?
This decision would have historical significance.
Since the law was passed in 2009 in the aftermath of the financial crisis, there has been no precedent.
In recent years, the question did not finally arise because Germany was in budget surplus.
However, Finance Minister Olaf Scholz had already mentioned the idea last March.
Above all, he felt that the level of public investment in Germany is far too low.
This represents a real problem in terms of the country's need for infrastructure.
This year, Germany's ten-year borrowing rate stands at -0.55%.
In short, investors pay to lend money.
It would be absurd not to take advantage of this situation to increase public investment and increase the country's growth potential.
The “
debt brake
” can be an obstacle to the country's economic recovery.
Technically is this possible?
Helge Braun believes that it is better to amend the German constitution on the structural deficit, rather than repeatedly suspending the golden rule through parliament.
In exceptional circumstances, the federal government can ask the Chamber of Deputies for authorization to exceed the threshold of 0.35%.
In 2020, German fiscal austerity was brought down by the crisis.
The country launched its plan of 130 billion euros for investments for the future and a revival of consumption, then breaking the rule of the brake on debt.
Technically, such a constitutional change is possible.
However, to revise the constitution in Germany, it is necessary to obtain a majority of two thirds of the deputies.
In fact, it looks very complicated.
It therefore seems unlikely to me that Germany will undertake this constitutional revision.
I think we will rather see a temporary indulgence in the face of the crisis, as we are seeing today at European level.
The budgetary rules resulting from the European Stability Pact (price stability, 3% maximum deficit, 60% maximum debt as well) have been suspended for 2020 and 2021. In the spring, the European Commission will examine whether an extension of the suspension is desirable for 2022. Portugal, which took over the Presidency of the Council of the EU earlier this year, explained that it was better for countries to return to their 2019 GDP levels before again advocating fiscal restraint.
In my opinion, these fiscal and monetary rules are a serious obstacle to the EU's economic recovery.
They are at the origin of European downgrading, facing the United States and China, which continue to rely on massive investments.
From 2008 to the end of 2019, European growth was between 8 and 9% on average, compared to a level of 22% in the United States.
How should France view this debate across the Rhine?
To understand the debate, we must also consider Germany's approach at European level.
European processes are underway, with both the review of the European Growth Pact and the ECB's monetary policy review, the outcome of which is to be announced at the end of 2021. If there is an easing of the monetary policy at European level to support growth, Germany as a member state would have less need to relax its national budgetary rules in order to increase its public investments.
But this scenario remains unlikely.
I would say that France must look favorably on the debate across the Rhine.
The Germans are strict, but French conservatism is very real.
If we consider public expenditure in billions of euros, and not in relation to GDP, the increase has been greater in Germany than in France over the past ten years.
In Germany as in France with the Covid crisis, a medium-term tax increase could appear as the only solution if we do not change budgetary doctrines.
To revive our economies after the crisis, we must not reproduce the austerity policies of the past.
We should no longer be afraid of exceeding deficits, because the market's level of confidence in European debts is on track to last.