by Federico Fubini and Stefano Montefiori
The French Economy Minister: «Deficit rules, each country sets its own calendar, but sanctions legitimize. We need a strong response to American subsidies”
Minister, how do you see inflation in the medium term?
“Let’s be clear: after this energy crisis is over, we will probably have inflation levels higher than in recent decades,” Bruno Le Maire, French economy minister, told a small group of major European newspapers. And do you know why? Because the relocation of our productions – a strategic priority of all European countries – and the decarbonization of the economy will structurally increase the cost of some products ».
Does the European Central Bank’s rate hike bring the risk of fragmentation back to the euro area, ie widening the spreads of the most indebted countries?
“We don’t see him at the moment. Spreads on 10-year bonds between Germany, France, Spain and Italy remain limited for the time being ».
Le Maire: the full interview
Is another European bailout plan like Recovery or Sure needed?
“The right response to the inflationary crisis is not to meet demand indefinitely, but to lower energy prices by uncoupling electricity prices from gas prices, coordinating gas purchases and investing in energy self-sufficiency.”
Why do you think the main problem for Europe isn’t the recession, maybe short-lived, which is just around the corner?
“The real risk for Europe is the decline of the industry. The European Union now accounts for 17% of the world economy. In 1990 it was 25%. Even China now represents 17% of the world economy, up from 3% in 1990. The real risk for Europe is to lag behind technologically, industrially and economically, leaving the field open to the United States and China. . We must give ourselves the means to reindustrialize Europe to remain a major industrial world power.”
Why is European industry so vulnerable?
“Because it is already at a competitive disadvantage due to energy price differentials between the United States and Europe. In addition, there is a risk that the massive subsidies from the US Inflation Reduction Act (IRA) and the equally heavily subsidized Chinese competition will widen the gap even further. So we have to react quickly. I call for a coordinated, united and strong response from the European Union to our American allies. Only with firmness will we be able to achieve results ».
Which reactions are you talking about specifically?
“We expect clear and proportionate proposals from the European Commission. This can mean a stricter affirmation of our environmental interests, European preferential mechanisms (in international trade, ed.) or an accelerated use of European reciprocity instruments, such as the rule against state aid in third countries. But the second axis is of course to lower energy prices in Europe. Let’s take a French company like Safran that makes carbon brakes. Energy accounts for 40% of production costs. In France, the price of energy has quintupled, while it has remained stable in the US and Asia. So the company has postponed the decision on a new carbon brake factory near Lyon».
How do you react to Washington subsidies for industry?
“We reject the race for subsidies. It violates all the rules of international trade. Some large foreign companies wanting to set up in Europe are now hesitating, unsure whether to open factories in Europe or in America. In some cases, the weight of the subsidies proposed by the Biden administration is four to 10 times the maximum amount approved by the European Commission. In France, according to our first estimates, investments of 10 billion euros and thousands of industrial jobs are at stake ».
Does the World Trade Organization need an appeal against the United States?
«We evaluate all the tools available to us. Europe must defend its interests. Nobody, neither China nor the United States, will give you anything».
With the new stability pact, the Commission intends to give each country the opportunity to decide for itself on its debt and deficit course… Is that a French victory?
«The basic principle of Europe is that nobody wins or loses. We all agree: budget seriousness is non-negotiable. France is determined: it has a timeline to return to a deficit below 3% in 2027 and a debt reduction timeline. Don’t doubt our decision to respect it. However, to be effective, the pace of deleveraging needs to be tailored to the situation of individual euro area countries. Today, the debt differences between the states are very high. It would be illusory to subject all states to the same calendar and require the same reforms from them».
And the penalties, including financial ones, for those who don’t honor their commitments?
“We need common rules that take into account the specific situations of each country. In this context, it is legitimate for the Commission to give itself the means to ensure that each country honors its commitments. State responsibility requires strict control. In this case, France is in favor ».
Italy has always been a country with a strong European tradition. What criteria will you use to judge whether Giorgia Meloni’s government will remain so?
“The Italian people have voted and their sovereign decision must be respected. It strikes me that the new prime minister’s first trip was to Brussels. I see it as a sign of European commitment”
November 7, 2022 (Change November 7, 2022 | 05:45)
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