Berlin treads softly-softly on Macron over deficit

Germany is taking a softly-softly approach to French President Emmanuel Macrons use of government largesse to calm violent "yellow vest" protests, government sources say, as Berlin puts European stability above fiscal discipline.

A reluctance to criticise publicly contrasts with complaints about France from Italy whose populist coalition government is in a stand-off with Brussels over its own big-spending budget which includes a sharp spike in the deficit.

"It's good news that things are calming down. France is Germany's most important partner and we have no interest in seeing it destabilised for the long term," a senior German government source said.

Ministers have been urged not to stoke confrontation with Paris as Macron attempts to end mass demonstrations against his pro-business reforms, promising tax and spending measures for the lowest earners worth billions of euros (dollars).

"We don't yet know all the details of the measures and how they'll be paid for, but in principle it's not up to other (EU) member states to judge them," Chancellor Angela Merkel's spokesman Steffen Seibert said Wednesday.

Damping down fires

Especially since the financial crisis of 2008, Germany under Merkel has prioritised tight budgets, with deficits held to well under the EU three percent of GDP limit.

Her governments have also slashed accumulated total debt, bringing it down towards the EU ceiling of 60 percent of GDP.

They have not been shy of passing judgement on less stringent fellow EU members -- such as Italy -- and have opposed reforms to the 19-nation euro single currency that could mean more risk sharing between capitals.

But for now Berlin's larger concern is a political crisis across Europe that has been fired by populist victories, including Britons' 2016 vote to quit the European Union.

Italy, too, has been largely spared a wagging Teutonic finger this year despite its deficit-busting budget which the EU, in a first, rejected outright, insisting that Rome try again.

"We see it in France, we see it in other countries, we have an urgent responsibility to halt these populist movements in the European elections" next May, another government source said.

The tone from the European Commission has meanwhile been notably calm and understanding -- unlike for Rome, as the Italian government has pointed out.

Brussels understands that "in the face of social movements and very strong demands to reduce regional or social disintegration, a government may need to take measures," Economic Affairs Commissioner Pierre Moscovici told AFP Wednesday.

That could justify "limited, temporary" higher deficits, he added, while insisting there was "no double standard" between France and Italy.

"I can't imagine that we'll act as if nothing has happened over demands worth billions from an obivously struggling Macron, while taking on the Italians' wallets," Italy's Deputy Prime Minister Matteo Salvini said.

Despite their public forbearance, German leaders are in private frustrated with Macron's uphill struggle to push through reforms they see as indispensable.

One senior official noted how the young president's at times arrogant style has alienated parts of the French public.

And any weakening of restraint in French spending policy undermines Macron's bet he could win German confidence by showing France could live within its means and reshape state finances.

'More Renzi than Schroeder'

German economists greeted sceptically Macron's emergency concessions to the "yellow vests" after repeated weekends of marches, barricades and violence around France.

For example, an increase in the minimum wage "will not reduce social tensions in France, where the minimum wage is already so high that it hampers the employment of weaker groups in the labour market, especially young people," said Clemens Fuest, head of Munich's influential Ifo think-tank.

German newspapers, which last week celebrated the 50th anniversary of irrepressible Gaulish comic book hero Asterix appearing in the language, see a similar stubbornness in modern France's resistance to its young president.

For conservative Die Welt daily, Macron is "more of a Matteo Renzi", whose recent premiership in Italy failed to secure much-needed reforms, rather than a Gerhard Schroeder, the chancellor whose policies are credited with reviving Germany's fortunes after the moribund early 2000s.