France will propose a new “growth contract” with its eurozone partners to encourage northern European countries to invest more and for southern countries to undertake further reforms, its finance minister said.
Finance Minister Bruno Le Maire said he would make the proposal to his eurozone counterparts later today on the sidelines of a G7 meeting in Washington.
“We can’t just stand there with our arms crossed in the face of the marked and worrying global slowdown,” Mr Le Maire told a French parliamentary finance commission.
The global economic outlook has dimmed rapidly in recent months amid trade tensions and Brexit worries, the IMF warned this week. And it downgraded its outlook for the third time since October.
Growth is slowing in regional powerhouse Germany as well as Italy, while it is proving more resilient in France. The IMF forecast growth in Germany this year at 0.8% and Italy at only 0.1%, while France was seen at 1.3%.
Mr Le Maire said the proposed new “growth contract” would consist of reforms in countries with weak competitiveness in exchange for more public investment in countries with less budget strains, like Germany, Finland, and the Netherlands.
France has long called for more public investment in northern Europe, but its appeals have largely been ignored.
As the economy minister at the time, President Emmanuel Macron urged Germany in 2014 to spend an additional €50bn on investments to support the European economy.
Mr Le Maire insisted he was not simply reiterating such calls for more spending from Germany, as France was pushing ahead with reforms of its economic model.
“But solidarity requires that they make the necessary public investments so that overall the eurozone does better. If it is everyman for himself, there is no point in being in a monetary union,” he said.
Mr Le Maire said his plan also relied on more efforts to protect the eurozone against a future crisis, such as having a shared budget to reduce economic divergences, finalising a planned backstop for bad bank loans and better integration of financial markets.