Rehn Says French Taxes Hurt Growth as EU Widens Criticism

European Union Economic and Monetary Affairs Commissioner Olli Rehn intensified his criticism of France, saying that it was falling behind other euro nations in restoring competitiveness.

While France needs to boost growth and employment, President Francois Hollande’s tax increases are having the opposite effect, Rehn said today in Brussels.

“In France, so far the consolidation of public finances has been done largely by tax increases, in relative terms more than expenditure cuts, and this is clearly hurting growth in France,” Rehn said.

Rehn’s remarks keep the EU at odds over policy with France and Germany, the euro area’s two largest economies. While France has come under pressure to ease labor laws and cut spending, the EU is investigating whether Germany’s trade surplus is having an adverse impact on the currency bloc.

Germany and France “could really do their best service for the European economy in terms of sustainable growth and job creation by complementary economic policies so that Germany would reinforce domestic demand and boost investment infrastructure and investment while France could intensify its economic reforms for the sake of growth and unemployment,” Rehn said.

The EU forecasts the French economy to grow by 0.9 percent next year compared with the euro area’s 1.1 percent, according to figures from October. Unemployment, predicted to be 11 percent in 2013, while lower than the euro-area average of 12.2 percent, is predicted by the EU to grow through 2015.

Rehn’s criticism of France was prompted by today’s release of a report by the Lisbon Council co-written by Berenberg Chief Economist Holger Schmieding, who called France the “sick man” of Europe.

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