Merkel ally says France is "problem child", must save more

BERLIN Fri Feb 22, 2013 6:43am EST

German Chancellor Angela Merkel delivers a policy statement about her government's EU policy during a session of the Bundestag, the lower house of parliament in Berlin February 21, 2013. REUTERS/Thomas Peter

German Chancellor Angela Merkel delivers a policy statement about her government's EU policy during a session of the Bundestag, the lower house of parliament in Berlin February 21, 2013.

Credit: Reuters/Thomas Peter

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BERLIN (Reuters) - France is a "problem child" in the euro zone and needs to implement more austerity measures and labor market reforms to regain competitiveness, a senior ally of German Chancellor Angela Merkel said on Friday.

"The French need to do their homework - they're very, very behind other countries and that is alarming because France is the second biggest economy in Europe," conservative lawmaker Michael Fuchs said on Germany's Deutschlandfunk radio.

He said France still needs to undergo German-style labor market reforms. Economists generally credit the so-called 'Agenda 2010' program - launched under Merkel's Social Democrat predecessor Gerhard Schroeder - with laying the basis for Germany's current economic strength.

France has been steadily losing competitiveness to Germany and concerns are mounting that Berlin's insistence on fiscal austerity will delay an economic upturn in the euro zone's second biggest economy.

"The French need to save - they need to save in as many areas of the country as possible to become more able to act and they of course also need to implement economic reforms and change their working hours," Fuchs said.

"The French still have a 35-hour working week. That can't work if people have to work 42 hours a week in Switzerland and an average of 40 hours a week in Germany. France needs to head in this direction to become more competitive."

He also criticized France's pension system, saying demographic developments meant the French needed to work longer rather than retiring at 60.

Asked if France was beginning to look like a crisis state, Fuchs said: "Unfortunately France is a problem child in the euro zone because other countries have done their homework a lot more intensively - for example Spain and Italy under (Prime Minister Mario) Monti, but the French believed they could escape this."

"That won't work - the whole euro zone needs to become competitive internationally - we all need to be internationally competitive and the French are very behind in this regard," he said.

On Friday, the European Commission said it was considering giving France more time to bring its budget deficit below EU limits due to its slow economic recovery. Data released on Thursday showed a growing risk of recession in France.

Fuchs said he hoped the Italians would prevent former prime minister Silvio Berlusconi from returning to power when they go to the polls this weekend.

(Reporting by Michelle Martin, editing by Gareth Jones)

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