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16 October 2019

Fran­co-Ger­man Min­is­te­ri­al Coun­cil: new roadmap on eco­nom­ic and fi­nan­cial co­op­er­a­tion

On 16 October 2019, Minister of Finance Olaf Scholz participated in the Franco-German Ministerial Council in Toulouse, France. The French and German ministries of finance and economic affairs agreed on a new roadmap on economic and financial issues, with a special focus on exploring bilateral cooperation and developing common positions at the EU level.

Group photo of German and French ministers
Source:  Federal Ministry of Finance

1. Revamping the Franco-German relationship : landmark steps have been achieved over the last two years

The Aachen Treaty provided a renewed framework to foster the Franco-German bilateral economic relations:

  • The Franco-German Council for economic experts has been established and its ten members appointed: Agnès Benassy-Quéré, Christian Gollier, Philippe Martin, Xavier Ragot, Katheline Schubert, Marcel Fratzscher, Nicola Fuchs-Schündeln, Clemens Fuest, Christoph M. Schmidt, Isabel Schnabel. The Franco-German Ministerial Council welcomes the launch of the Council’s work under the presidency of its two co-chairs.
  • Franco-German economic area: Germany and France will continue to cooperate when implementing EU-directives, inter alia in the field of business and insolvency law, and coordinate the economic policies on a regular basis.
  • Artificial intelligence (AI) (project 10): the Treaty lays down the creation of a Franco-German research and innovation network for AI. The four ministries (in charge of economy and research) have finalized a roadmap which endorses the creation of a virtual network on AI, with a ‘research’ link and a ‘business’ link. The business ‘link’ plans the networking of French and German operators, with the aim of transferring skills and technologies to companies. A common approach on a secure and trust worthy data storage infrastructure allowing for data sharing initiatives, a coordinated action on AI standardisation, a common position on AI legislation and a reflection on breakthrough innovation projects are also announced within the roadmap. The roadmap has been presented during the Franco-German Ministerial Council.
  • In the field of financial services (project 14): a group of experts launched by the French, German and Dutch ministers has presented a report on Capital Markets Union (CMU) with the aim to fuel the debate, including on sustainable finance issues. This report is a valuable contribution to the design of the CMU, which brings some workable proposals to the table. The Franco-German Ministerial Council agrees to work towards common positions taking into account this report.

Most of the Franco-German proposals included in the Meseberg Declaration already turned into concrete actions at the European level. We welcome the progress made in the Eurogroup on the strengthening of the Economic and Monetary Union and invite the Eurogroup to continue working on all the necessary elements. We take note of the broad agreement reached by the Eurogroup on the creation of a budgetary instrument for convergence and competitiveness for the euro area and on major steps regarding the reform of the European Stability Mechanism. The full package of reform should be finalized by December. We fully support the Commission’s announcement of its intention to propose concrete commitments and objectives to prevent and remove unnecessary regulatory and non-regulatory burdens and barriers in the Single Market, including exploring the possible introduction of a new « one in one out » principle.

2. Exploring new bilateral cooperation and developing new common positions at the EU level

Objective 1: Implementing a new strategy for growth at the Eurozone level

While growth in the Eurozone remains positive, it has been slowing down in the last year. In case of a potential deterioration of growth dynamics, French and German governments are committed to deliver a strategy for growth following three pillars: (i) continuing with the implementation of structural reforms, (ii) pursuing the debt reduction efforts in countries with high debt levels and (iii) pursuing strong public investment and increasing it where possible. We are ready to counteract a potential further deterioration by activating the appropriate fiscal responses if needed. France and Germany also welcome the intention of the President-elect of the Commission to implement a Sustainable Europe Investment Plan to mobilize additional investment over the next decade. France and Germany agreed to regularly exchange views on this issue.

Objective 2: Strengthening the Eurozone

France and Germany welcome the recent agreement of the Eurogroup on a budgetary instrument for convergence and competitiveness. It is now of utmost importance to proceed with the finalization of the legislative work and to give this instrument a credible size including resources to be provided by an intergovernmental agreement.

France and Germany also pursue the further integration of the banking market with special respect concerning the transposition of Basel III. France and Germany will continue to examine the issue of a European Unemployment Stabilisation Fund for the case of severe economic crisis, without transfer.

Objective 3: Developing new common projects in the field of AI and breakthrough innovation

In the field of AI, France and Germany defined the main features of a common approach to artificial intelligence by developing a secured European data infrastructure and by pooling data. France and Germany agreed to reach a joint approach in early 2020 on a common data infrastructure and to explore a data sharing initiative in a specific sector as a pilot for such an infrastructure. In the field of breakthrough innovation, France and Germany set up a joint working group to identify a common method for bi- and multilateral projects, taking into account the European Innovation Council.

Objective 4: Defining a common strategy at the EU level to finance sustainable development

France and Germany agreed to transform the European Investment Bank (EIB) into a European Climate Bank including by considering, if needed, a capital increase in the mid-term, dedicated to climate projects. As regards the Multiannual Financial Framework (MFF), without prejudging the overall volume of the MFF, we agree that strong or additional incentives are needed regarding climate protection. An ambitious climate spending target should be set for the Multiannual Financial Framework with an effective methodology for tracking climate spending; the MFF as a whole should contribute to the implementation of the Paris Agreement effectively.

We support the work on the strategy planned by President elect von der Leyen, to examine possible measures to prevent carbon leakage, inter alia a carbon border tax. We will work more closely together on these issues.

France and Germany will continue to develop common industrial projects related to sustainable development. By the end of the year, Ministers of Economy of both countries will cut the first spade of a pilot factory for electric batteries for cars, subject to approval by the EU Commission. The first factory will then open in France in 2022 and a second one in Germany in 2024.

France and Germany will work on the development of further important projects of common European interest (IPCEI) and concrete European action plans to boost the transformation of European industry, building on the results of the Strategic forum IPCEI on European strategic value chains (notably clean, connected and autonomous vehicles, hydrogen energy, low-carbon technologies…).

As pointed out in the paper on Franco-German priorities, France and Germany will work on common proposals on State aid to facilitate the achievement of ambitious climate goals, to further foster our innovation capacity and to secure cross-firm cooperation in new value chains.