Weidmann Slams French 'Savings' - Widening Franco-German Divide

Tyler Durden's picture

While German finance minister Schaeuble 'blessed' the French two-year grace-period for 'missing the deficit targets', adding that "he trusts France.. and is aware of its duties and responsibilities," it is his fellow countryman that is making headlines.

Though the pains to which the politicians are going to convince an increasingly gullible public that the Franco-German divide is strong, German central bank head Jens Weidmann has strongly criticized French efforts to reduce its budget deficit warning that French delays could damage the credibility of euro-zone rules. The real money man exclaimed, "you can't call that savings, as far as I am concerned," adding that France (as a 'core' member of Europe) must strive to set a positive example, and not "damage their credibility by taking advantage of the built-in flexibility."

We have been vehement (here and here) that France is on the cusp of a very serious depression and this 'verbal' pressure from Weidmann will not go down well with France's Moscovici who begged, "we don't want excessive consolidation for our country, we don't want austerity beyond what is necessary," but the broad fear is that France is setting a bad example, "only a question of time before other highly-indebted countries demand concessions."

Via Spiegel,

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Jens Weidmann, the president of Germany's central bank, the Bundesbank, said he is adamantly opposed to the move. "You can't call that savings, as far as I am concerned," he told the daily Westdeutsche Allegemeine Zeitung in an interview. "To win back trust, we can't just establish rules and then promise to fulfil them at some point in the future. They have to be filled with life," Weidmann said.

 

France had originally hoped to reduce its budget deficit below the 3 percent limit this year, but with its economy suffering, the deficit is likely to be closer to 4 percent and slightly higher in 2014.

 

As a euro-zone "heavyweight", Weidmann said, France must strive to set a positive example. "Particularly now, at a time when we have strengthened the rules regarding deficit reduction, we shouldn't damage their credibility by taking advantage of the built-in flexibility. What we need is trust in our ability to clean up state finances."

 

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French Finance Minister Pierre Moscovici said that Paris planned to scale back its austerity measures. "We don't want excessive consolidation for our country, we don't want austerity beyond what is necessary,"

 

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German Finance Minister Wolfgang Schäuble likewise seems to be at pains to counter the widespread perception that France and Germany are at odds... "they are on the right track. France is a strong country and is aware of its duties and responsibilities." Earlier this week, Schäuble said he found the two-year grace period for France to be "appropriate." "I trust the Commission," he said, "but most of all I trust France."

 

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France is in danger of "once again becoming the greatest transgressor of EU stability rules" and said it is "only a question of time before other highly-indebted countries demand concessions."

 

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