France ‘Not Sick Man of Europe’, Says Paris
France's socialist government seized on better than expected economic growth figures to reject concern that France could become the next focus of the euro zone crisis, insisting it is acting to reform the flagging economy.
"France is not the sick man of Europe. France remains the world's fifth largest economic power that has all its resources but which needs to recover its competitiveness," Pierre Moscovici, the finance minister told the FT.
Recent forecasts of weak French economic performance from the EU and the International Monetary Fund have fuelled fears that the country could exacerbate the euro zone recession if President François Hollande's six-month-old government does not enact structural reforms similar to those underway in Italy and Spain.
The German government has barely hidden its suspicion that Mr. Hollande is not doing enough to address its competitiveness problems and concerns are mounting among European policy makers that the financial markets could turn against France.
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The French government was boosted on Thursday by official figures showing its economy had eked out growth of 0.2 per cent in the third quarter, against expectations of flat or negative growth.
But gross domestic product in the euro zone as a whole fell back into recession for the first time in three years, shrinking 0.1 per cent in June to September as Greece, Italy, Spain, Portugal, Austria and the Netherlands contracted sharply, according to the EU's statistics office.
Prime minister Jean-Marc Ayrault visited Chancellor Angela Merkel in Berlin on Thursday to rebut German government worries. "Our goal is to return to growth,'' Mr. Ayrault said. "France has its own history and my challenge is to reform what is not working and correct what is weak, while retaining our core values." Ms Merkel said: "I wholeheartedly wish success to what is being set in motion in France now."
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In an interview with the Financial Times, Mr. Moscovici said: "No, we are not implementing the same reforms as Italy and Spain because we are not Italy or Spain. We don't have the same weaknesses. So we will implement reforms à la Française. They will be more ambitious than any [French government] before us."
He said the government's projection of 0.8 per cent growth in 2013 – twice the EU and IMF forecasts – was "not beyond reach", especially if the euro zone stabilized, boosting confidence.
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"Contrary to received wisdom, the French economy retains real potential. It is not a weakened economy without resources. The question is, are we capable of mobilizing these assets to rebuild our economic power," Mr Moscovici said.
Apart from its commitment to reducing its budget deficit to 3 per cent of GDP next year, the government has met demands from business for urgent action to address France's slide in competitiveness by reducing labor costs by 6 per cent and unveiling a range of measures to spur investment and business growth. Employers and trade unions are discussing labor market reforms.
"The mood has changed," Mr Moscovici said. "Up until 15 days ago the mood was that France was a country of all the taxes – [people were saying] we have to flee, we're leaving, we're leaving. Now the mood is that we are building a contract and we will invest and employ."