French prime minister says euro 'a bit' overvalued

PARIS Thu Mar 13, 2014 4:02pm EDT

French Prime Minister Jean-Marc Ayrault leaves the weekly cabinet meeting at the Elysee Palace in Paris February 26, 2014. REUTERS/Jacky Naegelen

French Prime Minister Jean-Marc Ayrault leaves the weekly cabinet meeting at the Elysee Palace in Paris February 26, 2014.

Credit: Reuters/Jacky Naegelen

PARIS (Reuters) - France's prime minister said on Thursday that the euro was "a bit" overvalued, but said that should not discourage France from making efforts to regain competitiveness.

"A strong euro can penalize certain businesses and help others. But for all that, it's true that the euro is a bit overvalued," Prime Minister Jean-Marc Ayrault told Les Echos daily, saying the International Monetary Fund agreed.

"But that should not dissuade us from making efforts to regain competitiveness," Ayrault added in the interview that appeared on Thursday on the newspaper's website.

The so-called "responsibility pact" announced by Socialist President Francois Hollande late last year is aimed at recovering lost competitiveness by easing the tax burden on French companies while requiring them to hire more.

Unions and employers are currently in talks over how to cut the social charges weighing on companies, but both sides doubt that Hollande's stated goal of linking the cuts to "clear, precise, measurable and verifiable" hiring targets is workable.

Finance Minister Pierre Moscovici said on Sunday that the euro was at a high level that should be monitored, but also added it should not be a "scapegoat" for France's economic problems.

European Central Bank President Mario Draghi said on Thursday the bank was preparing policy steps to guard against deflation in the euro zone as the strong euro weighs on prices.

After his comments, the common currency fell 0.4 percent at $1.3850, erasing earlier gains that had seen it rise to a 2-1/2 year peak of $1.3967 after the ECB signaled last week no need for new economic stimulus.

(Reporting By Alexandria Sage; Editing by Robin Pomeroy)

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