Weakness of French growth 'surprising'

The European Central Bank finds the weak performance of the French economy surprising, its chief economist Peter Praet told AFP in an interview, urging Paris to press ahead with reforms.

"What is most striking about France is that it hasn't had serious debt or banking crises like other countries," Praet said.

"Therefore, the weak performance of the French economy has been surprising," he said.

The French government's "willingness to press ahead with reforms is real but the implementation is very difficult," Praet said.  

"The government is tackling the structural problems, but they are experiencing difficulties in pushing through the reforms, say on the labour market. There are still very substantial barriers there," he said.

"It is still difficult to persuade people."

In terms of the pace of the reforms, Paris had opted "for multiplication of small steps, but the results have been limited so far," Praet said.

"There is a need to convince the population of the necessity of the reforms.

"Monetary policy alone will not be enough to achieve sustainable economic growth," Praet said.

France is projecting gross domestic product (GDP) growth of around one percent this year and 1.5 percent next year.

But it has moved back until 2017 the timetable for bringing its deficit ratio back below the 3.0-percent ceiling laid down in eurozone rules.

Under the government's proposed 2016 budget, taxes will be cut, including two billion euros on revenue tax, and charges lowered for businesses. Other measures are also planned to boost demand and enhance competitiveness.

But "the question of structural reforms in France goes far beyond the question of boosting demand with budgetary or monetary policy," Praet said, urging Paris to be more resolute in implementing reforms.

French Finance Minister Michel Sapin was in Frankfurt on Monday, where he met, among others, ECB president Mario Draghi.
Source: AFP