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German Memo Labels France Europe’s Problem Child

Kiran Moodley, special to CNBC.com
Wednesday, 1 May 2013 | 4:42 AM ET
French President Francois Hollande (L) speaks with German Chancellor Angela Merkel (R)
Saul Loeb
French President Francois Hollande (L) speaks with German Chancellor Angela Merkel (R)

A German political memo which is critical of the French government and accuses the country of being "Europe's biggest problem child" has been leaked to a German national newspaper.

The financial daily Handelsblatt obtained a memo meant for the eyes of Vice Chancellor Philipp Rösler, who is the leader of the Free Democratic Party (FDP), a junior partner in Angela Merkel's coalition.

The FDP, a party that favors free market liberalism, criticizes the "problem child" for its highly-regulated labor market and social welfare system.

The party memo was published along with an internal assessment from the German economics ministry that listed French economic failings.

"The note was meant exclusively for internal use, and not for publication," the German economics ministry told news agency AFP,adding that the information from the department was part of a regular analysis of the competitiveness of euro zone countries.

The memo attacks France's increasing labor costs and minimal investment in research and development. It notes that France has the "second-shortest working year" in the European Union and its tax load is "the highest within the euro zone."

It continues: "French industry is increasingly losing its competitiveness.Businesses continue to move overseas, and the profitability of businesses is low."

Its eems France and Germany are playing a game of "leaked memos." Last Friday, an internal Socialist Party document described Angela Merkel's austerity drive in Europe "selfish" and Claude Bartolone, the Socialist president of France's National Assembly, said a "confrontation" was needed with the Germans.

While France's Labor and Interior ministers quickly denounced the document, President Francois Hollande and Prime Minister Jean-Marc Ayrault remained silent.

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