Why German leaders are raising unexpected praise for France

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A TEN INTERPRETATIONS French business leaders tended to look over the Rhine with envious eyes. Germany’s economic model, with strong exports, a skilled workforce, low unemployment and productive industry, was a source of great admiration. French publishers put out books with titles like “Should we follow the German model?” Newspaper headlines asked “But how do the Germans do it?” French business leaders and policymakers alike lamented their country’s inability to emulate its larger European neighbour.

Photo: The Economist

Today the talk among business leaders in Berlin would make French ministers cringe. German leaders, frustrated by the country’s dysfunctional three-party coalition, look favorably on the French government, which is prioritizing business, prosecuting corporate leaders and promoting of France strongly as a place for investment and innovation. Christian Lindner, finance minister and head of the free market, is supported by many types of businesses FDPwho want corporate tax cuts and less red tape, but the FDP it is the weakest of the three parties in the government coalition. At the same time, France is reaping the benefits of President Emmanuel Macron’s reforms for business. In 2022, for the fourth consecutive year, France attracted more foreign direct investment projects than any other EU country, according to EY, consultation. Paris is also winning the European race to attract financial services from Britain after Brexit. “France – Germany’s best,” ran a recent headline Der Spiegel, a German weekly. “The roles have been reversed,” says Klaus Schweinsberg, a German who teaches at ESCPleading French business school.

The reason German business leaders are praising France right now goes far beyond their problems at home dealing with the transition from dependence on Russian gas and Chinese exports, which has affected the German economy but left France less reliable. It depends on the awareness in Germany that the French have transformed the way they deal with investors and entrepreneurs. A country was often criticized for its guidance he seems to have found a way to use his centralized institutional structures not to control affairs but to support private sector companies, attract investors and nurture entrepreneurs.

Take Pfeiffer Vacuum, a German maker of vacuum pumps, which announced in May that it would invest €75m ($82m) in its factory in Annecy, in south-east France. Britta Giesen, the company’s chief executive, says she was personally attracted by the team around Mr Macron, promised a subsidy of around €20m, and helped with paperwork. To top it off, she was invited to make the announcement at “Choose France”, an annual gathering of leading politicians and foreign investors that has no equal in Germany, hosted this year by Mr Macron at the Château de Versailles. As the boss of midsize Mittelstand Adamantly, Ms Giesen wanted to sit next to Elon Musk, the head of Tesla, and Lakshmi Mittal, a steel tycoon.

One difference, notes Ms Giesen, is that Mr Macron, a former investment banker, is putting people with business backgrounds in government. Roland Lescure, the industry minister, for example, is a former investor. In fact the president regularly berates his political opponents, on the hard left and hard right, for being too proactive. But such companies know what they need, and the investments they attract can be politically useful when new factories hire workers in France’s rust belt and other regions. are likely to vote for the fringes. In Germany, almost no member of parliament or senior civil servant has such experience, with the exception of Jörg Kukies, who was the head of Goldman Sachs in Germany, one of the closest advisers to the German chancellor.

In general, France is quietly reinventing nature lead industrial planning. Under Georges Pompidou in the 1970s the state created the plan (fast trains, nuclear energy) and the civil servants put it in place. Today, there is still a plan, called France 2030, which includes an investment of €54bn in future and green technologies, including green hydrogen production, modular nuclear reactors new, battery and semiconductor production and low carbon aircraft. But, says Mr. Lescure, “He is not returning to the guidance of the past. It is not about making himself in the ministry, but helping the work of private investors and entrepreneurs.” Verkor, the company currently building a €2bn battery plant in Dunkirk, for example, as part of the planned “Battery Valley” in France, is a start-up. Instead, the state builds infrastructure and pays to deal with externalities. On 22 November the government was to sign agreements to subsidize emissions reductions with the 50 factories which between them account for a tenth of France’s carbon emissions. It also speeds up paperwork. A new “green business” law aims to reduce the average time to obtain a building permit and official approval for a new factory from 17 months to nine.

France is now better than Germany in using state policies to support the market economy, says Sven Janssen, a German venture capitalist. “Mr Macron particularly understands the promotion of innovation and start-ups,” he notes. La French Tech is a smartly branded networking platform used by the French economy ministry to market tech companies abroad; Germany has no real partner. French start-ups, such as Doctolib, an online booking service for medical appointments, or PayFit, a payment software maker, are now household names in Germany. The French public investment bank, Bpifrance, has also turned out to be a key link for French entrepreneurs. When it was set up in 2013, skeptics feared it would turn into an unwieldy bureaucracy, under political orders to prop up ailing companies. Today it manages assets worth €50bn, and in 2022 it made net profits of €1.5bn.

The philosophy, says Nicolas Dufourcq, head of Bpifrance, “is to invest as much money in the reconstruction of the French economy by entrepreneurs. ” This means fostering a culture of risk-taking and crushing bureaucracy. The bank has, among other things, invested heavily in the development of a generation of French venture capital funds; he also takes direct commitments and helps his clients to sort out red tape. None of the bank’s 3,500 employees are civil servants; Mr. Dufourcq himself was a former technology consultant. Bpifrance and German, the KfWon the other hand, financing entrepreneurs indirectly through their banks.

Germany is still an industrial powerhouse in Europe, of course. It is still home to more of the continent’s top 20 startups than France. France got serious about a new industrial policy after being alarmed by Germany’s decision in 2022 to splurge on its own industrial transition. The French have not passed the old subsidy race. When Tesla recently chose Germany over France (and other places) for a major expansion, it was only after heavy lobbying and reliance on state subsidies by the French. At least France’s appeal is bolstered by a wider record of getting the big things right, from nuclear power and world-class infrastructure to state-provided childcare and the gastronomy.

Ultimately, France’s dream of greater industrial and economic autonomy for Europe depends on Germany’s ability to get it right as well. But as German leaders show unexpected respect for their French neighbour, the country has also learned a lesson in humility. In the German press at least, there is no more talk about it Branches (Ill France).

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