Twenty-second Ambassadors’ Conference/European Union
Paris, August 28, 2014
I would like to conclude by focusing on the major challenge Europe presents for our country. During the European elections, not just in France, but especially in France, citizens expressed their mistrust, as well as their demands.
The answer is that Europe must change. It must call into question a number of policies, clarify its organization, regain people’s support and above all win the growth and employment battle. Why?
Because one in every four young people in Europe is unemployed. Because the recovery is too weak. Because inflation is too low. Because the euro is too expensive. Because Europe risks a long and perhaps endless period of stagnation if we do nothing.
We must first take action at the national level. That’s what France is doing. It didn’t wait for Europe to reorder its priorities – even though it’s working on it – before carrying out its reforms. These reforms are under way. They are taking place in many areas, out of a concern for competitiveness and justice.
But these so-called structural reforms must be aimed at improving the economic and social performance of our countries. These reforms can work only if Europe also mobilizes its efforts and creates the right environment. The two are linked. We shouldn’t expect everything from Europe, but we shouldn’t believe that structural reforms (necessary and essential) and the reduction of the public deficit (which we must continue) will be enough. There must be a willingness, coordination and also choices.
The ECB has started to take action. But a lot will depend on the way the banks take advantage of ECB liquidity and make it available to the economy. All the same, we’re faced with a paradox, since interest rates have never been so low. I’m not talking about French interest rates, which are at a record low. The interest rate in the market is currently 1.3%, with a gap of 0.3% between the French and German rates. The rate has never been so low.
It seems like everything is going well. Capital is being invested, interest rates are low, but investment is slow. Why? Because the transmission channel isn’t automatic. There’s a problem with the transmission of monetary policy – which is nevertheless very favourable for credit – to businesses, which are not accessing this credit enough. That’s why I will convene the investment financing conference in September so that we can increase mobilization in support of investment.
The ECB is assuming its responsibilities. Mario Draghi has issued statements. I’m not going to interpret the statements, since that would not necessarily help him or us. But at the same time, it may, as it has indicated, go further if necessary. The countries experiencing the strongest recovery – I’m thinking of the United States – have a monetary policy that has lent very strong support to economic activity.
Along with monetary policy, we need a budgetary policy that must play an important role and take the economic situation – what is known as exceptional circumstances – into account. Are these exceptional circumstances? Yes: of stagnation (while there’s been a recovery, it is too weak) and low inflation. There are those who speak of deflation, but that’s not where we are.
This too is a rather odd situation: we’re complaining about weak inflation, and the French people are complaining about the high cost of living. Both of these things are true. The rate of price increases may indeed be low yet there’s the feeling that some prices are too high, particularly for the most vulnerable members of society. We must make sure that these situations can be taken into account in determining each country’s budgetary policy. So the pace of deficit reduction must be compatible with growth objectives and low inflation.
Europe must also do more. It must increase investment in priority areas: infrastructure, research, innovation, training, the environment. Jean-Claude Juncker announced €300 billion would be allocated, with public and private investments. In this area too, we must make certain that this plan is not only approved but implemented. And it must happen as soon as possible.
That is the position I will defend at the forthcoming European Councils: a new growth initiative and complete flexibility in the pace of deficit reduction, with due regard for European rules, but doing everything they allow.
I will propose a Euro Area summit to be held as soon as possible in order to take the necessary decisions.
This is in Europe’s interest, because it is its place in the world economy that’s at stake. We cannot be seen as the continent with the world’s lowest growth rate, and the only one that isn’t experiencing economic recovery.
Change in Europe also means policies for the future: an energy policy that enables us to make a successful transition, a digital policy to make up for the delay in that area, to establish leaders at the global level and to respect and ensure the respect of personal data.
Change in Europe also means the need for transparency and reciprocity in international negotiations, particularly the transatlantic treaty. It is this need for transparency and reciprocity that I brought before the European Commission with our Italian friends.
Finally, change in Europe means improved monitoring of the external borders of the Schengen Area, particularly in the Mediterranean. At my request and in conjunction with Italy, the Interior Minister took a decision to ensure that we can avoid the tragedies occurring in the Mediterranean. We must make sure that “Frontex” – the organization, protection and monitoring of borders – is strengthened, but also that the free movement of individuals is preserved within Europe.
The European institutions will have to organize themselves according to these priorities. Jean-Claude Juncker, the new Commission President, will soon present his College of Commissioners. I appointed Pierre Moscovici as the French commissioner. And I asked the President, who is free to form his team, to give him economic responsibility in the Commission. But it’s up to him to make his choices.
France will continue to play its role in Europe – for Europe and not merely for
France, although France cannot be regarded as just one country in Europe. We are Europe’s second-largest economy; we are the nation that makes the greatest defence effort in Europe. We are the country whose foreign policy is in accordance with European deliberations but which also takes initiatives. We must therefore have a place in Europe that is in keeping with our status.
But we are also clear-sighted: a Europe with 28 members, and perhaps even more in the future, must change the way it makes decisions and organizes itself. I have advocated, and will continue to do so – talks will take place because some countries want to disengage from the European Union – a differentiated union, so that those who want to go faster, further, notably in relation to the Euro Area, can have an organization suited to their needs. It is that model that will give the European enterprise its meaning and perhaps its legitimacy in the eyes of many. (…)./.