Reuters Germany's booming economy has dominated the early exchanges in France's presidential election campaign but President Nicolas Sarkozy and his Socialist rival draw very different lessons from across the Rhine. While Sarkozy believes France must copy Germany's painful budget cuts, wage restraint and labor market deregulation to boost prosperity, Socialist poll frontrunner Francois Hollande warns that such austerity could choke off a fragile recovery. He wants to emulate Germany's investment in research, its support for small firms and its bigger role for trade unions in decision-making while keeping France's generous welfare system. “Not everything in Germany's economic model deserves to be copied,” Hollande's campaign chief Pierre Moscovici said. While French growth has stalled, Germany's robust recovery stands in painful contrast. Stripped of its AAA credit rating by Standard & Poor's last month, Paris posted a record trade deficit last year. Unemployment is at a 12-year high. Over the border, joblessness is at 20-year lows and exports hit a record last year. Small wonder perhaps that a recent poll found that 62 per cent of voters thought France should take the German model as an example. “Germany has had huge success. That doesn't make us jealous, that inspires us,” Sarkozy said in a television interview, pledging to learn from Germany's export-led growth. He praised the 2003-2005 Hartz reforms under former Social Democratic Chancellor Gerhard Schroeder that liberalised the German labor market, helping it to shake off the hangover of unification with former-Communist east Germany in 1990. Sarkozy plans to raise VAT to cut France's high labour costs by shifting the tax burden from payrolls to consumption, copying a step Germany took in 2007. He also wants to let firms bypass sectoral wage deals and negotiate on a company basis — effectively burying the national 35-hour work week which the Socialists introduced in 2000. Accusing Sarkozy of “capitulation to Germany”, the Socialists say the Hartz reforms generated underemployment and raised the number of working poor. With no national minimum wage, roughly one-fifth of German workers are in low paid jobs — a higher ratio even than in Greece. Hollande has vowed to renegotiate a fiscal discipline pact adopted by 25 European leaders last month, which Berlin made a condition of its support for euro zone bailouts. He wants to give more priority to growth and a larger role to the ECB. The Socialists aim to emulate German spending on research and support for small- and medium-sized companies that power exports — the Mittelstand. They cite studies showing non-price factors have given German goods the edge over French merchandize — technology, quality and product specialisation. “The Socialists seem to be missing the lessons of Germany's success: wage restraint and moving part of the supply chain to to cheaper countries,” said Gilles Moec, senior European economist at Deutsche Bank. __
