French President Emmanuel Macron wants European nations to break their “taboo” against using deficits to stimulate growth and investment, and scrap a strict limit on eurozone deficits, he said in an interview published Thursday.
“We need to rethink our economic deal,” Macron told The Economist magazine in an interview, referring in particular to the eurozone’s limit of government budget deficits at three percent of GDP.
That limit has been the bedrock of the common euro currency created in 1999, along with a rule limiting overall debt ratios to 60 percent of GDP.
France has been leading calls for Germany in particular to start investing part of its huge budget surplus in order to counter an EU-wide slowdown and spur investment.
If not, Macron warned, the continent risks being outpaced in key technological and defence realms — not least 5G network development — by the US and China, which are spending massively.
“Europe is one of the continents with the highest levels of savings. A large part of those savings is used to buy American Treasury bonds,” Macron told The Economist.
“So with our savings, we’re paying for America’s future, and what’s more we’re exposing ourselves to vulnerability. It’s absurd,” he said.
“That’s also why the debate about the three percent of national budgets and the one percent for the European budget belongs to the past century,” he said.
‘Not in the same league’
Germany and other EU nations are loath to let countries take on more debt, fearful of the painful austerity measures carried out in the wake of the 2007-2008 financial crisis.
France is already on track to breach eurozone rules this year with a 3.1 percent deficit, after Macron announced billions of euros in tax cuts and other relief in response to fierce “yellow vest” protests against his policies.
But Berlin in particular has resisted calls by the European Central Bank to open its purse strings, wary it would effectively give other countries to carry on with chronic deficits without making painful economic reforms.
But Macron said that if Europe wants to remain a global power, it cannot avoid taking on bigger deficits in order to commit more heavily to strategic investments.
Arguing over deficit levels, he said, would only let Washington and Beijing gain ground in key digital and military spheres at a time of huge geopolitical shifts.
“This sort of debate won’t allow us to prepare the future,” he said.
“When I look at our level of investment in artificial intelligence, compared with China or the United States, we’re just not in the same league,” he said.