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FRANCE AND GERMANY

ECONOMY

Paris warns Berlin: ‘You’re helping Le Pen’

The constant barrage of criticism towards France’s lifeless economy from across the Rhine has riled the French finance minister, who has accused Berlin of feeding the populist, anti-EU sentiment that the far-right National Front thrives on.

Paris warns Berlin: 'You're helping Le Pen'
Is Germany's frustration at France's lack of reforms aiding Le Pen and her anti-EU party. Photo: AFP

It was Chancellor Angela Merkel of all people who was the latest to fire a barb in the direction of France.

The longstanding German leader said Paris had not done enough to reform its economy in order to bring down its crippling public deficit.

Her comments were the straw that broke the camel’s back for France's frustrated finance minister Michel Sapin, who told the UK’s Financial Times on Tuesday that German politicians “need to choose the right words” when criticising France.

Without mentioning Merkel’s name Sapin said he was concerned by “certain extreme comments from Germany” and demanded political parties in Germany to counter “outdated” stereotypes about France.

“I think people have to be careful from the outside on how they express views on France,” Sapin told the FT.

“We really need to be careful to respect each other, and to respect each others’ history, national identity and points of sensitivity, because otherwise it will help extremist parties grow,” Sapin added.

The extremist party he was referring to is of course the National Front, led by Marine Le Pen who topped the polls in the European elections in May and is expected to make it through to a run-off vote in the 2017 presidential election.

Sapin’s comments reflect a growing sense of frustration in France towards Berlin and Brussels and the pressure they are putting on France to make further painful austerity cuts.

He had already insisted that reforms are being implemented for France’s benefit “and not to please this or that European politician”.

He pointed out that Germany had issues of its own.

“The number of German nationals is falling every year, which is why in ten or 20 years we in France , will be in a better position,” he said.

Opinion: Merkel now needs to meet Hollande halfway

But his choice of words were nothing as hostile as those of Jean-Luc Melenchon, the far-left firebrand who in response to the German chancellor’s comments simply said: “Shut it! Frau Merkel”.

Relations could sour even further in the coming months with the European Commission having set itself a deadline of March before it passes a verdict on the budgets of France, Italy and Belgium.

France recently announced efforts to shave a further €3.6 billion ($4.5 billion) off the country's deficit on top of a €21 billion cost-cutting plan, but Paris will still miss European Union deficit targets.

However finance Minister Sapin is convinced all will be well.

In a reference to the Bible while speaking in Dublin at the weekend Sapin said: "The commission, as Saint Thomas, wants to see in order to believe. So at the end of this year, the commission will see and, as Saint Thomas, the commission will believe."

If he is proved wrong we can expect more tension between Paris and Berlin and the war of words across the Rhine to be further inflamed. 

Not that Marine Le Pen will mind any of that.

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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