For Scholz, who is reluctant to reform, it would be worth taking a look at France

The state has “the best prerequisites for us to play in the top league technologically in ten, 20 and 30 years,” said the Chancellor a few days ago in Bavaria. “We mustn’t badmouth Germany as a business location,” he warned his critics.

And in the ZDF summer interview, he raved about the good local conditions that prompted corporations like Intel to carry out “the largest direct investment in the history of Europe” in Magdeburg: “It was a conscious decision by the companies, they didn’t come because of the subsidies. You have chosen Germany as a business location.” 

Scholz raves about Germany as a business location and misjudges reality

The truth is clearly different. In order to sharpen the view of the domestic situation, it is worth taking a look across the national border. Ironically, France, which is fixated on the state and centralized in Paris, surpasses the Federal Republic in all key economic data. In the duel between Germany and France, the Federal Republic is currently losing out.

Almost unnoticed, Emmanuel Macron initiated a small economic miracle. The economy is growing faster than the German one, inflation is lower. And the economic forecasts are also encouraging from a Paris perspective.

To describe it in the words of a German entrepreneur who operates plants for the zinc refinement of steel on both sides of the Rhine: “France is much more attractive for manufacturing companies, the location conditions relevant to us are better and industrial added value is politically valued”, says Lars Baumgurtel, boss and owner of ZinQ, a medium-sized company from Gelsenkirchen with a turnover of 400 million euros.

The traffic light rejects reform programs, and Macron has achieved notable successes with them

While the German government is rejecting a real reform program, such as Agenda 2010 under Gerd Schröder, Macron has passed powerful economic reforms – and achieved amazing successes with them.

In 2018, a year after Macron took office, Germany and France were still neck and neck when it came to attracting foreign investment. Today, France is the darling of investors. In 2022, Paris attracted 1,259 investment projects from abroad – 427 more than Berlin.

Macron is luring foreign companies to France with a strategy that goes beyond a price cap on big industry, which is being debated within the German government. So what does Macron do differently – and better than Scholz?

1. Clear commitment to business

Macron prioritizes the economy above all else in his political work. Because the president has one goal: re-industrialization. The industry share is around 17 percent in France and well over 20 percent in Germany. Macron has therefore been pushing reforms every year since 2017.

In May this year, he invited 200 foreign entrepreneurs to a summit at the Palace of Versailles, including managers from Pfizer, Disney, ArcelorMittal – and also Elon Musk. “Choose France” was the message. It was Macron’s sixth charm offensive. And she is reciprocated.

Even in mechanical engineering and car manufacturing – the classic key industries of the Federal Republic – France is now winning more settlement projects than Germany. From the point of view of the industry, not only the PR is right in France, but also the performance.

2. Inexpensive energy

France relies on nuclear power, Germany switched it off. There are arguments about nuclear power in this country, but you can’t operate chemical plants and steelworks with arguments. The two promises derived from French energy policy are important for the economy. One thing: Electricity from France is largely CO2-free – and companies that have long since declared climate neutrality as part of their corporate strategy appreciate that. On the other hand: Macron promises the companies permanently cheap electricity – and delivers it.

It is the lower electricity generation costs that make energy cheaper in France. In a recent study, the scientific services of the German Bundestag write that electricity from France is scarcely cheaper than German electricity without taking state duties and taxes into account. But: “If government duties and taxes are added to the price, there is a clearer price difference.”

3. Low taxes

France has traditionally been considered a high-tax country, but times have changed. In his first year in office, 2017, Macron began to systematically lower the tax burden for companies. At that time, the French corporate tax was 33 percent, today it is seven percentage points less.

Today, France has the same tax level as the USA – and well below that of its German neighbors. This gives the company room to breathe.

What Macron started in 2017, he is consistently continuing. The trade tax burden is to be reduced by a total of eight billion euros this year and next. A European location analysis by the EY consultancy states: “For several years now, the development in France has been much more dynamic than in Germany, for example.”

4. Falling labor costs

France sees itself as a high-wage country, but unlike Olaf Scholz, Macron does not shy away from social reforms. This year he pushed through a controversial pension reform. From September 1st, the retirement age will increase by three months every year. The 1968 vintage will be the first to land at 64 years old.

Labor costs in France are still somewhat higher than in Germany. But the direction of the numbers has changed. In the past ten years, hourly labor costs in the manufacturing industry in Germany have risen by almost 30 percent – in France only by 19 percent. 

Conclusion – “Impossible is not a French word”

Perhaps the next government retreat of the traffic light should not take place in East Germany, but at the gates of Paris. France is not only our neighbor, but also our role model. Or as the French poet Jean-Francois Collin d’Harleville said: “Impossible is not a French word.”

Hank Peter

Learn More →

Leave a Reply

Your email address will not be published. Required fields are marked *