France Suffers ‘Adjustment Fatigue’ on Austerity, Moscovici SaysSvenja O’Donnell and Francine Lacqua
France’s Finance Minister Pierre Moscovici said that his country is suffering “adjustment fatigue” as he reiterated his government’s push for policies to spur growth and fight unemployment.
“Our people, they feel that there is something of an adjustment fatigue, and they want jobs, jobs, jobs,” he said yesterday in an interview with Bloomberg Television at the Group of Seven meeting of finance chiefs in Aylesbury, near London. “It doesn’t mean that now we can be relaxed -- we cannot be relaxed. But it means we must think structural reforms. We must first of all reduce structural deficit and at the same time we preserve the capacity of France to grow and to create jobs.”
France and Germany have in the past clashed on the need to soften austerity, though Moscovici said his German counterpart Wolfgang Schaeuble now understands France’s push to gain additional time to cut its deficit. European Union Economic and Monetary Affairs Commissioner Olli Rehn earlier this month floated giving France two more years to meet EU deficit rules.
Data due on May 15 will probably show that France fell into a recession in the first quarter, with the median estimate in a Bloomberg News monthly survey saying gross domestic product declined 0.2 percent, following a 0.3 percent contraction in the final three months of 2012.
At the same time, jobless claims have climbed to a record and the country’s budget shortfall will amount to 3.9 percent of gross domestic product this year and 4.2 percent next year, according to the European Commission’s May 3 predictions.
“If we would have too much adjustment what would it mean?” Moscovici said. “It would mean that our economy would be in recession and we cannot accept that.”
The French and German finance chiefs “feel exactly in line, but of course with different situations, different positions,” Moscovici said. “I don’t like the word austerity, because austerity doesn’t just mean adjustment or structural adjustment, it means more than that,” he said. “It means cutting over what is necessary, it means getting poorer, it means breaking the social model -- so I never use the word austerity.”
Moscovici also said he did not advocate pushing for a weaker euro, saying that structural reforms were needed instead to make France more competitive.
Attempts to depreciated the 17-nation currency “would be the wrong idea, but I plead for competitiveness,” he said. “You know we obtained the postponements of the targets, why so? Not because we said we don’t want it. Because we said we are a credible country, we are reforming the country.”
Finance ministers at the G-7 yesterday reaffirmed their three-month old commitment not to manipulate currencies, agreeing “not to target exchange rates,” U.K. Chancellor of the Exchequer George Osborne said after chairing the meeting. Members have “held to” their February pledge to avoid doing so, he said.
While governments have succeeded in saving the euro, “the question for the people is: can the euro zone be also a good future for them -- can we recreate in this area growth and employment?” Moscovici said. “And we have to concentrate on that, without abandoning structural reforms of course.”
He also reiterated his country’s push for a full banking union within Europe, adding that the French banking sector was “very solid.”
“We absolutely need to have a banking union to fight against fragmentation of the banking sector,” he said. “To me it is a global a full banking union that we need to achieve.”