• Date 27 April 2021

Die Zeit: Mr Scholz, Mr Le Maire, today you are jointly kicking off the implementation of the European recovery fund. Why didn’t you invite one of your colleagues from Italy or Spain as well?

Bruno Le Maire: The Franco-German tandem has proved to be resilient in the face of the crisis. France and Germany have worked hand in hand to find a historic agreement in the form of a common debt issuance to finance the €750 billion that will be spent to help us get out of this crisis and accelerate the recovery. This is good news for France and Germany, but it is also good news for all European countries. That is why we will present together, with Spain, Germany and Italy, our recovery plan to the Commission, after Portugal did it last Thursday.

Olaf Scholz: I believe we are at the start of a new phase of European integration. We have provided a strong European response to this crisis in the form of the recovery fund. That is perhaps the biggest difference to the way earlier crises were dealt with, especially the financial crisis.

Die Zeit: The decision on the fund was taken a year ago. So far, not a single euro has been paid out. Doesn’t this show that, although Europe may be good at making big announcements, it isn’t so good at putting things into practice?

Olaf Scholz: No. Normally it takes two years to implement this kind of decision because it needs to be ratified in all the member states. Germany has already done this, and I hope that the countries that haven’t done so yet will soon follow suit. The money will start to flow in the summer.

Die Zeit: By that time the crisis will almost be over.

Olaf Scholz: The recovery fund is part of a whole series of assistance programmes that we set up to stabilise the economy. These include the European short-time work scheme SURE and providing easier access to funds from the European Stability Mechanism. With these measures, we ensured that all EU countries have the financial resources to fight the crisis forcefully. No eurozone member has experienced financial difficulties yet. That is another difference to the last crisis in 2008/2009.

Die Zeit: Europe is now spending €750 billion. Joe Biden is spending more than twice that. This begs the question: are we doing enough?

Bruno Le Maire: Let’s stop comparing ourselves with the United States! We should focus on our strengths. We should do what we think is good for Europe. Let’s build a sovereign and strong continent. Our recovery plan should also help us to fight against climate change. This is what we do in our recovery plans: investing in future technologies like hydrogen that will enable us to stay in the technological race and enable us to meet the challenge of ecological transition. These comparisons also don’t make sense, because our social safety net is very different from the American one and the euro area has already spent close to 5% of their GDP to protect their economies. So if you wanted to make a comparison, you would also have to take into consideration what is done on a national level.

Die Zeit: Mr Scholz, you made a comparison with Alexander Hamilton. In the 18th century, Hamilton as treasury secretary gave a decisive push to the formation of the American state through joint borrowing. Is the recovery fund a first step in the direction of a permanent fiscal union?

Olaf Scholz: Our agreement states that the debt incurred must be repaid by 2058 – quite a long period of time. Additionally, the EU will be equipped with own resources – in other words, with its own sources of revenue – so that it can handle the repayment of the debt. Revenue from a tax on financial transactions has been mentioned in this context, for example. This, too, is new.

Bruno Le Maire: We are determined to have a stronger Union. This is totally clear for us. This decision is the starting point for further integration for Europe.

Die Zeit: A huge amount of money will be paid out. Past experience with this in Europe has not always been good, because often the money didn’t get to the right place.

Olaf Scholz: We have drawn clear conclusions from the past. All member states are developing specific recovery plans, which will then be discussed with the European Commission. The money is not simply going into national budgets. It will be used to finance future challenges: shaping digitalisation, modernising infrastructure, the fight against climate change. In Germany, we will spend €3.3 billion on decarbonisation projects alone – for example, on the development and use of green hydrogen.

Die Zeit: What about in France?

Bruno Le Maire: The determination to transform the French economy by improving its competitiveness has been at the core of the mandate of Emmanuel Macron, and this remains unchanged. We intend to pursue our reforms to strengthen the resilience of our economy. We are talking about the possibility of having new technologies like batteries, hydrogen or artificial intelligence used for example for the sake of fighting against climate change. Let’s seize this opportunity.

Die Zeit: The EU’s Stability and Growth Pact stipulates an upper limit of 60% of GDP for government debt and a limit of 3% of GDP for the budget deficit. None of the EU countries fulfils these criteria. Is the pact dead?

Bruno Le Maire: Since the outbreak of the crisis, we have taken the right decisions at the right moment. We have reacted swiftly with strong fiscal packages, while activating the general escape clause of the Stability and Growth Pact. Today, we should not repeat the mistake made during the last crisis, when we wanted to consolidate the budgets too early and damaged the recovery. But of course, there will be a time when we will talk about reducing deficits and debt levels. For the time being, I think we should do our utmost efforts to invest. Our citizens are now waiting for more growth, more prosperity, more jobs. Looking beyond, we will need to draw lessons from the past and review when needed our common rules to ensure a better functioning of our common currency. One key question will be to take into account the very different situations in which the member states will be in terms of debt.

Die Zeit: Mr Scholz, would you be willing to reform the pact?

Olaf Scholz: A common currency needs common rules. Our rules have recently proved to be very flexible. They work.

Die Zeit: So no reforms?

Olaf Scholz: I’m known for my pragmatism. What’s important to me is that we are currently able to do what is necessary. We’ve been able to do that so far, and I believe that we will also be able to do it in future too.

Die Zeit: Would that be acceptable to you, Mr Le Maire?

Bruno Le Maire: At the moment we can use the flexibility that is built into the pact. As regards the future: we need to reflect in common on our common fiscal framework.

Die Zeit: Mr Scholz, what do you say to your critics who claim the Germans are now paying for other countries’ shortcomings?

Olaf Scholz: This view is totally wrong, for two reasons. First, Germany isn’t paying for other countries’ deficits. The EU is taking out loans for this purpose and will pay these loans back. Second, we are participating in a joint European project, from which Germany as an exporting country benefits enormously.

Die Zeit: Partly for that reason, you jointly declared the goal of a European budget in Meseberg three years ago. Are you still adhering to this goal?

Olaf Scholz: The Meseberg decisions, which Bruno and I were mainly responsible for preparing, were a genuine milestone, and not only for the Franco-German relationship. Many of these things have since become reality: the reform of the European Stability Mechanism, the deepening of the banking union and the start of a capital markets union. The recovery fund is proof that we have made a lot of progress in fiscal policy too.

Bruno Le Maire:: The Meseberg agreement has prepared the decisions that have been put in place through the crisis and due to the necessity of acting together. But there is still more to do and we must move forward in three directions: the banking union, which is progressing thanks to Eurogroup President Paschal Donohoe; the capital market union, critical if we want to mobilise capital from banks, insurance companies and investment funds to finance the industries of the future; and finally the digital euro that the ECB is developing, which will reinforce the international role of the single currency.

Die Zeit: With its proposal for a global minimum tax, the U.S. has added some momentum to the debate on international tax reform. Is this reform going to happen?

Olaf Scholz: In the last four years, we have worked very hard to reach an agreement at the international level. It’s not only about a minimum tax rate, but also about reallocating taxing rights with regard to multinational enterprises. Our goal is to ensure appropriate taxation of digital companies. Now we have the necessary momentum to achieve an agreement in the summer.

Bruno Le Maire: People are fed up with large companies not paying their fair share. People are fed up with digital companies not paying the same level of tax as the small businesses, either in Germany or in France. So the change of position within the U.S. administration is clearly very good news. For us it is important that minimum taxation and digital taxation go along together. We need to agree on a package. We are eager that a global agreement be found this summer.

Die Zeit: The U.S. is proposing a minimum tax rate of 21%. What do you think of that?

Bruno Le Maire: We have proposed at the beginning of the negotiation 12.5%. The U.S. administration has proposed to raise its own global minimum tax rate to 21%. Such a rate would be acceptable for the French government if there is a consensus.

Die Zeit: And in Germany, Mr Scholz?

Olaf Scholz: The important thing is that we agree to a percentage. The discussions in the coming weeks will reveal what exactly that percentage will be. I personally wouldn’t have any objections to the U.S. proposal.

Die Zeit: Have you already discussed this with your counterparts from Ireland, Malta or Luxembourg?

Olaf Scholz: The negotiations are ongoing. The signs are good that we will reach an agreement. The size of the tax rate is part of these discussions.

Die Zeit: Mr Le Maire, you talk mainly about digital businesses. However, the American government is envisaging a list of the 100 most-profitable companies in the world. This list wouldn’t just include US tech giants but maybe also European car manufacturers or chemical companies.

Bruno Le Maire: We want to have all the major digital companies included in the digital taxation.

Die Zeit: But what the U.S. is proposing isn’t just a pure global digital tax.

Bruno Le Maire: What matters is that the digital giants are fairly taxed. If their proposal is a way of catching the profits made by digital giants and if it is an efficient way to do it, this can be the basis for a compromise.

Olaf Scholz: The decisive question, and not just from the European perspective, is: will the tech giants be covered? We plan to examine the proposal in detail in this regard.

Die Zeit: And if there is an agreement, will France then abolish its national digital tax?

Bruno Le Maire: We have been very clear from the beginning: as soon as there is an international agreement on both digital taxation and minimum taxation, we will withdraw our national digital taxation. But let’s be very clear: in case there is no agreement at the international level, we will keep it.

Die Zeit: The current narrative is that the U.S. and Asia are emerging stronger from this crisis, while Europe has been weakened. What’s your opinion?

Olaf Scholz: The key term here is European sovereignty. All of the things that we have discussed help to strengthen this sovereignty. The world of the future will be a world of 10 billion people and multiple power centres: the U.S., China, but also Russia and certain countries in Asia, Africa and Latin America. Europe will only be able to hold its ground if it stands together. We are laying the groundwork for that.

Bruno Le Maire: After the crisis, the United States will seek to remain the first world power and China will accelerate its transformation to become the first world power. The question for Europe is to determine the role it wants to play in this century. Either we stay in the technological and economic race, or we will be in the second league. Europe must continue to have a strong presence and influence on the international scene. We have all the assets for it: a single market with more than 400 million citizens, a world-class capacity of innovation thanks to our universities, common values, cultures and history. I am all heartened to see us two finance ministers from France and Germany defending such a vision for Europe and in particular such an increase in European sovereignty. I think it is good news.