At the end of 2021 Mario Draghi and Emmanuel Macron  took a common position on European policy in view of the newyear. (Financial Times- “The EU’s fiscal rules must be reformed”, Opinion, December 24). Together, they expressed the need to relaunch the economy “large-scale investment in research, infrastructure, digitization and defense”. It, evidently, was a way for sustaining growth. This stance was important to fight the consequences of the pandemic, the compression of growth, the increase of precarious and mass unemployment.

Between Jospin and Kohl
It recalls a similar episode more than 20 years ago, in 1997, when Europe was about to adopt the euro, the main protagonists of which were Lionel Jospin, the new head of government in France, and Helmut Kohl, the German chancellor.

The goal was to revive growth that had languished for many years. The program of Jospin was characterized by major economic and social reforms such as the nationalization of important enterprises, the reduction to 35 hours of the week working, the increase of the minimum wage, and so on.

France had acclaimed and rewarded Jospin's program, as opposed to the right-wing policy of Chirac, the then President of the Republic, who had recklessly called elections in the hope of strengthening his right-wing majority in the Parliament.

But it was not surprising that Jospin's program had disappointed Kohl. Their first meeting in July 1997 , a few weeks after the surprising French electoral result, saw the divergence between the two heads on an essential point.

For Germany, the condition for the transition to the single currency was the reduction of the deficit toward 3 percent and tendentially to zero, and public debt toward 60 per cent of the national revenue. The divergence continued in the following months until the meeting of all member countries of the European community in October, when Jospin had finally to concede on this essential point.

But the economic circumstances were, in any case, favorable to increasing growth. The European community had taken advantage of the extraordinary growth of the American economy . And the generalized increase in growth allowed France to implement its program of social reforms and recovery, while remaining within a tolerable framework of public deficit and debt. Based on the Franco-German agreement, even though in contrast with the original French position, the European Union was finally being born.

However, the end of the millennium was also the end of the phase of growth that had characterized the Western world in the last years of the century. In the summer of 2001, the United States had suffered a sudden recession. And the events of 11 September 2001, with the attack on the Twin Towers, had profoundly changed the American scenario. The new-born euro was trapped in a phase of economic recession accompanied by the fiscal rigidity imposed by the rules of the new European Union.

In France, Jospin had to confront a new situation of economic stagnation and increasing unemployment in a context of growing social and political disappointment that severely tested his popularity. The French national elections in May 2002 had an unexpected outcome. Not only did the conservative party, led by  Chirac, win but, surprisingly, the far-right National Front headed by Jean-Marie Le Pen overtook the Socialist Party in the first electoral round. After the unexpected and heavy defeat of the French leftwing government, Jospin announced his retirement from political life.

In 2012 the French Socialist party won the elections again and François Holland took over the French presidency of the Republic. But the outcome was an historic failure. In 2017 national elections the Socialist party suffered the worst defeat in its history essentially disappearing from the political scene, after a century and a half during which the left-wing predecessors had been at the center of French political life in different ways.

Finally, the euro and the fundaments of the European economic policy were definitely in the hands of Germany, with the support of the European Central Bank and the European Commission.

Ways to exit the crisis
Since debt is measured as a percentage of income, its percentage reduction depends directly on the level of national income, essentially on its growth. There is no shortage of examples. The United States suffered in 2020 a fiscal crisis as a result of the pandemic and the fall of GDP with a consequent strong increase in the percentage of debt. The decision of the president Biden to invest 1900 billion dollars between the end of 2001 and 2002 increased GDP along with public and private consumption. And unemployment fell from 10 to 3.8 percent at the end of 2021, one of the lowest levels in the past decades. Now new major investment hare scheduled for relaunching the development in the next years.

Japan invested the equivalent of 1250 billion dollars in the two years of the pandemic. The national debt  blew up to be more than 250 percent of GDP, the highest globally recorded,  but growth has returned to normal levels and unemployment stands at 2.7 percent.

China is a specific case for its political regime, but no less significant for this. After the outbreak of the pandemic, production and consumption fell sharply. The intervention in this case focused on the growth of investments. High investments in the public sector, from roads to railways, have boosted employment, household income and consumption. 2001 saw an increase of about 8 percent in national income, one of the highest in the last decade.

In the European Union a different position prevails. National unemployment affects all the major countries but with strong differences, reaching a limited 3.3 per cent in Germany against  7.6 per cent in France,  9.4 percent in Italy and 14.5 percent in Spain.

The pandemic has , as it was unavoidable, increased the public debt in all countries, touching around 120 percent of GDP in France and Spain, and 155 percent in Italy. But according the Eu rules it has to be reduced to 60 percent of the GDP in the course of determined years. A task evidently impossible in a context of low growth and high unemployment.

The recent position assumed by Macron and Draghi has to be read as a clear alternative to this abstract position. “The EU’s fiscal rules – they have written - must be reformed… They also failed to provide incentives for prioritizing key public spending for the future and for our sovereignty, including public investment….We cannot expect to do this through higher taxes or unsustainable cuts in social spending, nor can we choke off growth through unviable fiscal adjustment.” (Financial Times,24 December 2021). A position of two main EU countries clearly at odds with current Eurozone policy. However, this is not the position of   Germany along with a part of the EU member states with a minor debt or close to the 60 per cent fixed by the European treaties.

Not casually, an Irish reader wrote in a letter to the Financial Times:  “the proposals put forward by Messrs. Mario Draghi and Emmanuel Macron are ill-thought-out and deeply worrying ”(December 30, 2021). An assessment that reflects the position of a large party of EU countries under the German hegemony.

The next future
The course of events is still crucial, just as it was in the days of Jospin and later Hollande. Then the German conservative politics prevailed, and the French position was defeated. Now the problem emerges again.

The next few months will show us which direction European politics will take. Draghi  may go up to the Quirinale as president of the Republic, or remain at the helm of the government for another year Macron will have to face the electoral test next spring, with an outcome in many ways uncertain. In any case, the next few months will tell us if the position of France and Italy is destined to melt like winter snow in the sun of the coming seasons.

The important article, cited above, not surprisingly signed together by Macron and Draghi alludes to the role of national sovereignty twice.  A reference to sovereignty that is generally excluded  in the UE official documents. We will know if this is a pure style clause aimed at strengthening the position of the respective governments, destined to the failure, as it happened in the past. Or if, they are proof of the role the two countries actually intend to play in changing controversial and, until now, disappointing European politics.