Schröder, Chirac Set for Run-In at Seville | Business| Economy and finance news from a German perspective | DW | 18.06.2002
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Schröder, Chirac Set for Run-In at Seville

Germany and France look set for a run-in at this weekend's E.U. summit in Seville, particularly over the question of the budget goals laid down in the pact for stability and growth.


A strained friendship: German Chancellor Gerhard Schroeder (left) and French President Jacques Chirac (middle).

The German government under Chancellor Gerhard Schröder looks set for a run-in with France, possibly the country's most important European Union partner, at this weekend's E.U. summit in Seville.

There are three key issues at stake. First is the question of direct aid to farmers from the central and eastern European countries that are about to accede to the E.U.

On Sunday, Schröder made it clear that he will not go along with the plan to allow the accession countries to start receiving aid from 2004 onwards. He said before any such aid is paid out, there must be a full reform of EU agricultural policy. France, meanwhile, believes that such a reform need not take place until 2006. Its new agricultural minister, Hervé Gaymard, warned on Monday of the possibility of a complete destruction of the Common Agricultural Policy.

Meanwhile, it's clear from statements made by insiders on Monday that the German government is set to take a hard line on two other issues: the goals laid down in the EU's pact for stability and growth, and France's decision in 2000 – along with Italy and the Netherlands – to introduce tax subsidies on diesel oil in response to road-blockade protests from truck drivers and haulers.

Here, as with agricultural policy, the German and French stances seem to vary wildly. And it's the issue of the stability pact that's seen to offer the greatest potential for conflict. ";Germany will reject any attempt to put back the target date for a balanced budget from the agreed 2004 to 2006,"; said one German government insider. This effectively represents a rejection of an idea mooted on several occasions by President Jacques Chirac of France.

German government insiders were on Monday also pointing out that the last figures showed France's budget deficit standing at 2.6% of the country's gross domestic product. This, it was argued, is dangerously close to the 3% upper limit allowed under the stability pact. Earlier this year, Germany narrowly avoided the issue of an E.U. Commission warning letter over its budget deficits. That debate produced a reaffirmation of Germany's commitment to the targets set out in the stability pact, particularly the goal of a balanced budget by 2004.

German government insiders were on Monday wondering aloud why it was that the Commission is taking a more relaxed view of the budget difficulties currently experienced by France – and also by Italy and Portugal – than it did of Germany's.

The EU Commission rejected any talk of preferential treatment. "We treat all member-states the same," said a spokesman for Monetary Affairs Commissioner Pedro Solbes. The Commission would not be able to work out whether member-states were likely to reach their budget targets before the start of 2003. Only then would it be possible to evaluate the budget situation in the member-states, Solbes' spokesman added.

The spokesman said that the Commission had no knowledge of an increased French deficit. Right now, no decisions had been taken on the possibility of any new warning letters, he said. Member-states were working towards the goal of achieving a virtually balanced budget by 2004. That goal was set out in the EU's economic-policy guidelines for 2002. That's on the agenda for Friday's summit in Seville.

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