France pleads for new EU economic strategy

Posted Thursday, Jul. 10, 2014  comments  Print Reprints
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France's economy minister is blaming European authorities for the lack of growth in France and Europe, and says it's time for a new economic policy that shuns austerity.

Arnaud Montebourg, in a closely watched speech Thursday on economic recovery, also suggested France may seek more time from EU authorities to bring down its debt.

France, with Europe's No. 2 economy, is holding back the rebound across the continent. Its growth has been flat for two years, and unemployment continues to rise. French President Francois Hollande has promised to nurture a more business-friendly environment, in hopes of turning the tide of investment and persuading companies to hire.

Montebourg said the policy of cutting public deficits in Europe and France was "morally right but economically wrong" and that austerity measures are a "European disease" that stunted eurozone growth.

Montebourg also said the European Central Bank should do more to weaken the euro in order to boost growth.

He vowed the government would make 50 billion euros ($68 billion) in spending cuts, as planned, but proposed to use only one-third of the money saved to reduce the deficit, with the rest going to cut taxes.

Montebourg's speech is part of a larger strategy by Hollande and the Socialist government to mollify their hard-left electoral base and lay the groundwork for long-awaited economic reforms.

In a speech Sunday intended to bring around rebellious factions within the party, Prime Minister Manuel Valls said the time was long past for half-measures and demonizing capitalists.

"What does it mean to be a leftist? Is it to raise public spending? Is it to raise taxes?" he said. "Who will create jobs if not companies?"

The government is pushing for more flexibility in the EU budget rules, and analysts agree that France will probably fall short of its commitment to bring the budget deficit to the limit of 3 percent of gross domestic product next year.

Meanwhile, Socialist Pierre Moscovici, former finance minister of Hollande, is a candidate to become the next European economics commissioner, one of the most powerful positions in the EU.

Lori Hinnant contributed to this report.

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