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France tells Germany it will slash deficit

Associated Press

BERLIN (AP) - France's prime minister assured Germany on Thursday that his country is committed to getting its debt under control, amid concerns that the second-largest economy in the eurozone is weakening.

During his first visit to Berlin since taking office in May, Jean-Marc Ayrault sought to dispel fears that Germany's most important ally in fighting Europe's debt crisis could itself be heading for trouble just as the French government has to slash spending to reduce its deficit.

France wants to "stop burdening future generations with continuously rising debt and restore the necessary leeway for political actions," Ayrault told a gathering of German business leaders. He stressed that "we are aware that getting the public finances in order is also the precondition for our sovereignty."

Eurozone members Greece, Ireland and Portugal have all had to accept painful austerity demands in return for bailouts from the bloc's richer nations.

According to official figures published Thursday, France narrowly dodged recession in the third quarter. Its economy expanded 0.2 percent in the July-September period from the previous quarter- as did that of Germany, where growth is slowing.

President Francois Hollande's Socialist government last week announced measures to rein in government spending, lower labor costs to strengthen the country's competitiveness and reduce the deficit, largely by raising taxes.

"I wholeheartedly wish success to what is being set in motion in France now," German Chancellor Angela Merkel said following talks with Ayrault.

"Our goal is to return to growth," Ayrault maintained.

Still, France has watched unemployment tick steadily up as a raft of companies announced layoffs in recent months. The jobless rate now stands at 10.8 percent, according to European statistics.

Thursday's edition of Britain's weekly The Economist featured a special report on France, with the magazine's cover reading "the time bomb at the heart of Europe." France's woes have also started to worry some in Germany, who fear their closest ally's political clout could be reduced by its economic weakness.

"France is our closest partner in Europe. It would be good if the Socialists there would now courageously embark on real structural reforms," Volker Kauder, the parliamentary leader of Chancellor Angela Merkel's conservative bloc, said last week. "That would be good for the country and so for Europe."

Speaking at the conference after Ayrault, the head of Germany's influential BDI industry lobby group insisted that both, Germany and France, must be economically strong to continue leading the European Union.

"There is no Europe in which Germany and France do not play in the same league," said Hans-Peter Keitel. "You cannot separate us," added Keitel, who has met twice with Hollande this year.

German Finance Minister Wolfgang Schaeuble, speaking at the same conference, said European nations who jointly make up the world's biggest economy should not give each other marks but work together.

"The world needs a strong Europe," he said.

Ayrault, in turn, said the "overly high level of preoccupation in Germany" over the euro crisis may be due to the fact that Germany will hold national elections next year. "Then tensions are always on the rise," he told German daily Sueddeutsche Zeitung in an interview.

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Juergen Baetz can be reached on Twitter at http://www.twitter.com/jbaetz


(Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)
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