UPDATE 1-ECB's Weidmann rebuffs French calls on euro, growth - Le Monde

Wed Aug 13, 2014 6:21am EDT

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By Ingrid Melander

PARIS Aug 13 (Reuters) - ECB policymaker Jens Weidmann said on Wednesday that euro zone monetary policy should not aim to weaken the euro and individual member states should take steps to boost growth, rebuffing French calls for Germany and the European Central Bank to do more.

French President Francois Hollande, anxious to boost his country's stagnant economy, has recently beefed up calls for Germany to invest more and act to lift growth in the whole euro zone. France has also urged more ECB action to weaken the euro, even after its recent softening, saying its strength hurts exports.

But Weidmann, who is head of Germany's central bank as well as a member of the ECB's decision-making council, told French daily Le Monde in an interview: "The temptation to boost the competitiveness of our economies by weakening the euro should not be the purpose of the single currency."

"A strong Europe and a strong euro go hand in hand," said Weidmann, regarded as a strong advocate of fiscal rigour and non-intervention on exchange rates.

Urging France to cut public spending further and set an example on budgetary matters, Weidmann said: "Growth must ... come from inside: it is not up to neighbouring governments or to the ECB but to each government to create at home an environment favorable to business innovation and jobs."

A spokeswoman for the German government said last week that Berlin saw no need to change its economic policy after Hollande urged it to invest more for the sake of European growth.

Germany's stance could make it more difficult for France if Paris seeks to use weak growth and inflation as reasons to request further leniency from European partners on fiscal targets.

Data on Wednesday showed that French inflation is stuck at its lowest level since November 2009, reinforcing government concerns that low inflation will harm its efforts to meet public deficit targets.

The government has promised to clarify the state of the economy and public finances after the publication of second-quarter GDP data on Thursday, which is expected to come in barely above zero after no growth at all in the first quarter.

While France has warned of deflationary risks in the euro zone, Weidmann told Le Monde that he does not think the single currency bloc faces such risks. "We are not in a self-perpetuating deflationary scenario," he said. "Recovery is weak but inflation and growth should gradually emerge," he said.

ECB chief Mario Draghi, an Italian, made an implicit rebuke to Italy and France, last week, saying that countries that had made economic reforms were reaping the rewards in higher growth.

"The countries that have undertaken a convincing programme of structural reforms are performing better, much better, than the countries that have not done so," Draghi said at the ECB's monthly news conference on Thursday.

Draghi also said last week that conditions for a weaker euro were much better than a few months ago.

The euro was trading on Wednesday slightly above a nine-month low of $1.3331 hit on Aug. 6. (Additional reporting by Brian Love and Yann Le Guernigou in Paris and Paul Carrel in Frankfurt; Editing by Susan Fenton)

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