December 10, 2013 3:20 pm

Pierre Moscovici rejects gloomy view of French economy

Pierre Moscovici©AFP

Pierre Moscovici, French finance minister

Pierre Moscovici, France’s finance minister, unwittingly sparked a national clamour when he acknowledged in August that the French were “fed up” with the country’s high taxes.

Now he himself is clearly fed up with a wave of pessimism that has some economists worried that sclerosis in France is holding back a broader recovery in the crisis-battered eurozone.

France has truly emerged from recession,” he insists. “Of course, I would like to see the growth rate increase, but I wish we could stop this attitude of systematic doubt about the French economy.”

This tendency to what ministers call “French bashing” comes from inside the country as well as outside, admits Mr Moscovici.

“But there is a more negative view about France abroad than it deserves. France is the fifth-biggest economy in the world. It has come through the crisis better than most in the eurozone.”

In an interview with the Financial Times, Mr Moscovici reels off a catalogue of measures the government has taken since President François Hollande took the reins 18 months ago.

The budget deficit is being reduced. Public spending savings worth €50bn are programmed for the next four years. Tax breaks of €20bn are being given to employers to cut labour costs. There has been labour market and pension reform. An overhaul of unemployment benefit is in the pipeline.

”Don’t underestimate these decisions,” says Mr Moscovici.

Michel Martinez, chief euro economist at Société Générale, agrees that the government has done more on reform than it is given credit for.

But he worries that what he calls “baby steps” are not enough to reverse “a very slow deterioration process”. He adds: “France is the average student in the class. It only does just enough to graduate to the next level.”

Mr Moscovici rejects this analysis: “France is undertaking ambitious reforms, but there are still prejudices against us. I believe our results are much better than those prejudices suggest.”

In depth

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The economy is hard to read at the moment. It shrank 0.1 per cent in the third quarter. Last week Markit indicators for the private sector pointed to a further fall in gross domestic product in the fourth quarter.

But this week the Bank of France upped its forecast for fourth-quarter growth to 0.5 per cent. The big international economic institutions, including the European Commission, broadly agree with the government’s forecasts of about 1 per cent growth next year, followed by 1.7 per cent in 2015.

“It’s not wishful thinking. I base what I am saying on reality,” says Mr Moscovici.

The minister, who headed Mr Hollande’s presidential election campaign, has other reasons to be frustrated. A self-proclaimed reformist social democrat, he is often the subject of speculation that he will be moved in a government reshuffle seen as likely next year.

Last month, he was only told at the last minute when Jean-Marc Ayrault, the prime minister, unveiled a tax reform plan cooked up with Mr Hollande.

But Mr Moscovici, a former Europe minister, has stuck to his guns, tending particularly to relations with Brussels and Berlin. This was essential to France winning two years’ grace from the commission for meeting the EU deficit limit of 3 per cent of GDP, pushing the target back to 2015.

That will be met, Mr Moscovici assures. “I’m not just confident, I’m committed. We are on course to hit the target and there is no reason to doubt that.”

From 2015, 100 per cent of the deficit reduction effort will come from public spending cuts, he says. But he offers no apologies for the government’s initial reliance on tax increases, despite the recent protests. “Not at all,” he says, rejecting the suggestion that growth might have been stronger if spending had been cut instead.

Mr Moscovici shares widespread concern about the rise of populist parties in Europe in the wake of the euro crisis.

But the man charged with hitting France’s deficit target adds, in a flurry of mixed metaphors, that the EU must quickly start to offer something brighter than the relentless austerity of recent years.

“Europe must not be just a punishment, not just a purgative. We have to consolidate our public finances, and France is doing that. But we have to offer a vision of growth and employment. If we are always tightening the screw, stepping on the brakes, you have to realise our citizens will turn against the European project.”

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