French finance minister: "Worrying" Italy vote shows Europe needs growth

PARIS Tue Feb 26, 2013 11:00am EST

France's Economy, Finance and Foreign Trade Minister Pierre Moscovici leaves 11 Downing Street in London February 25, 2013. REUTERS/Suzanne Plunkett

France's Economy, Finance and Foreign Trade Minister Pierre Moscovici leaves 11 Downing Street in London February 25, 2013.

Credit: Reuters/Suzanne Plunkett

PARIS (Reuters) - Italy's inconclusive election shows Europe's leaders must give voters across the region hope of stronger growth to offset painful austerity, French Finance Minister Pierre Moscovici said on Tuesday.

France's Socialist government, which last week acknowledged it will not hit its 2013 deficit-cutting target, has long insisted that efforts to rein in debt across the euro zone must be counter-balanced by measures to bolster its sickly economies.

Germany and others are less keen on that view.

Moscovici said the political deadlock emerging from Italy's general election was "no doubt a worry" and hoped that centre-leftist Pier Luigi Bersani would be able to use his lower house majority to form a solid and reformist government.

But while he said the painful austerity reforms undertaken by outgoing technocrat premier Mario Monti had been necessary, he told the Reuters Euro Zone Summit that Italy and Europe also needed to be given "another perspective".

"The message from Italy is: 'Be careful, when you are in a situation in which you ask populations to make sacrifices for long periods, at the end you risk having protests'," Moscovici said in his Paris office.

"There needs to be another perspective - which is growth again," he said in an interview, one of a number Reuters is conducting with top euro zone policymakers this week.

DEFICIT LEEWAY

Defending France's call to be granted another year to hit a 2013 target of cutting its public deficit to three percent of output, Moscovici said further cuts than those already announced by President Francois Hollande were not possible given France's anemic growth rate and unemployment stuck at over 10 percent.

"That's why I don't want us to do the three percent now ... if we did, we'd kill off the little (2013) growth we have of around 0.1 percent and we would set ourselves up for a political and social crisis that at some point would feed into populism at election time," he said.

"What I am asking for is some time, not an indulgence. I think the European Commission understands France's situation ... For me, France made the effort that was needed in 2013 and I promise that in 2014 we will do all we can to ensure that the deficit is below three percent."

Moscovici put the 2012 deficit at around 4.5 percent and noted the Commission forecast that the deficit would fall to 3.7 percent this year. He did not give a new set of forecasts but reaffirmed the mid-term aim of a balanced budget in 2017.

Asked about signs of a growing divergence between France, the euro zone's second largest economy, and EU economic powerhouse Germany, Moscovici pointed to efforts to boost the French business sector through tax breaks of labor reforms.

"This is the reason why this government is deeply committed to implementing a strong policy to regain competitiveness ... It's by investment it's by hiring that we will find the perspective of growth and employment."

A committed pro-European who voted in favour of the EU constitution thrown out in 2005 by French and Dutch voters, Moscovici nonetheless said measures to promote growth should take precedence over new moves to deepen EU integration.

"The people in Europe will only believe again in Europe if they see perspectives of growth and employment. If people feel that Europe is too far away from them, if they feel that Europe is only sacrifice, if they feel that Europe doesn't create fairness, then there is no way to have a stronger institutions for Europe," he said.

(Additional reporting by Yann Le Guernigou and Leigh Thomas. Editing by Catherine Bremer/Mike Peacock)

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