EU: The French and German leaders have announced a bilateral investment plan they hope will revive their economies, and have given assurances they will respect budgetary rules to protect the euro.
Chancellor Gerhard Schröder and President Jacques Chirac argued in Berlin yesterday that everyone in the euro zone would gain from the plan if it stimulated economic growth in their countries, even if it breached the rules of the Stability and Growth Pact.
"Europe cannot wait for growth, but must find it . . . this is the moment for European leaders to do something to find growth," said Mr Chirac, after a joint sitting of the French and German cabinets in Berlin yesterday.
The two leaders presented a 10-point plan - "Germany and France for more Growth in Europe" - that envisages investment in common research, construction and telecommunications projects, financed to a large extent by low-interest loans from the European Investment Bank.
One proposal would connect France and Germany's high-speed rail networks, the TGV and ICE, by 2007; another would increase investment in the satellite positing system Galileo, the European competitor to the US Global Positioning System (GPS).
"It's about supporting the economy right at this moment when there are positive signs for better economic development," said Mr Schröder, saying the measures would help "make Europe a place of growth and of competitiveness" and "give economic impetus without giving up the goal of budget consolidation".
France and Germany are likely to breach euro zone budget deficit rules this year for the second year running and again next year, to the frustration of other euro zone members who have consolidated their budgets. Mr Schröder said "a temporarily higher deficit" was better than blindly following euro zone rules "that cripple any recovery tendencies".
"I want to emphasis that we're not giving up our consolidation goals. We'll simply have to stretch the timetable for the consolidation process," he told the Handelsblatt newspaper.
Mr Chirac said France would accept "the discipline required by our single currency" and that his government would not try to solve its problems with continuous rises in public spending.
"But in the name of growth and in the name of employment, we owe it to ourselves to act with wisdom and proper judgment," he said before arriving in Berlin.
The EU Commission greeted the German-Franco initiative. "We're very satisfied that the topic has been placed right at the top of the political agenda," said a spokesman for Mr Pedro Solbes, the Economic and Monetary Affairs Commissioner.
After falling out with the US and Britain over Iraq and the rest of the EU over the euro zone rules, the two leaders presented a united front before journalists at the Chancellery in Berlin. It was the second such meeting since the 40th anniversary of the Treaty of Elysée, which saw a revitalising of Franco-German relations.
Mr Chirac spoke of the two countries' "common interests common concerns, common efforts, and common vision".
On the subject of Iraq, Mr Chirac said he would like to see a quick transfer of power to Iraqis in Baghdad. "When I say as quickly as possible, I of course mean months, not years," he said.
The French President returns to Berlin on Saturday for talks on Iraq with Mr Schröder and the British Prime Minister, Mr Blair.
The Chancellor will travel to New York next week for his first meeting with President Bush since the transatlantic fallout over the Iraq war.
Mr Schröder said Germany would be willing to help train new Iraqi security forces. Mr Chirac said it was "self-evident that, since the Chancellor reaffirmed this position here, France takes the same position".