Villeroy Says Europe Needs Stable Germany to Be Ready for Crisis

(Bloomberg) -- Bank of France Governor Francois Villeroy de Galhau said a strong and stable German government is needed to strengthen Europe and to ensure the European Central Bank doesn’t have to fight crises on its own.

“We Europeans need a stable German government, we need a strong Germany and we also need some kind of German leadership,” Villeroy said in a panel discussion at the World Economic Forum’s annual meeting in Davos, Switzerland.

“We need other common economic tools in order for monetary policy not to be the only game in town when the next recession comes.”

Villeroy -- who called himself a “friend of Germany” and offered to speak to the forum in German -- said his message to the country is “don’t be afraid. Be more self confident today. We need you in Europe, we need a strong Germany.”

More than four months after Chancellor Angela Merkel won a national election, the country still is without a new government. Negotiators from Germany’s two biggest parties began formal coalition talks this week under pressure to deliver. With the Social Democrats split over being part of the government, hurdles remain to Merkel’s ending the deadlock and starting her fourth term.

The absence of a new German government has slowed progress on revamping European Union institutions at a time when French President Emmanuel Macron is pushing to complete the region’s banking union, capital markets union and to begin harmonizing corporate tax rates.

Macron’s government wants France and Germany to make proposals on those issues by March and Villeroy, speaking earlier in an interview on Bloomberg TV, said this offers a window of opportunity.

“There is a prospect of a pro-European Grand Coalition: it’s a promising prospect, but we will see -- it is up to Germans to decide.”

--With assistance from Francine Lacqua

To contact the reporter on this story: Mark Deen in Paris at markdeen@bloomberg.net.

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Zoe Schneeweiss

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