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| Europeans Fear France Could Threaten Recovery | |
| (1 day later) | |
| AIX-EN-PROVENCE, France — As Europe struggles to move past the worst of its debt crisis, France has increasingly become a worry point in the recovery. | AIX-EN-PROVENCE, France — As Europe struggles to move past the worst of its debt crisis, France has increasingly become a worry point in the recovery. |
| The economy has been hovering too long near stagnation, economists warned at an economics conference here on Sunday, saying that unless the government in Paris pushed more strenuously to improve growth alongside Germany, its performance threatened to weigh on the prospects for a wider recovery in the euro zone. | The economy has been hovering too long near stagnation, economists warned at an economics conference here on Sunday, saying that unless the government in Paris pushed more strenuously to improve growth alongside Germany, its performance threatened to weigh on the prospects for a wider recovery in the euro zone. |
| “The weakness of France is visible,” Bertrand Badré, managing director and chief financial officer of the World Bank Group in Washington, said in an interview on the sidelines of the conference. “It’s not that France and Germany should dominate,” he added, “but if we can’t find a way together it might be an issue.” | “The weakness of France is visible,” Bertrand Badré, managing director and chief financial officer of the World Bank Group in Washington, said in an interview on the sidelines of the conference. “It’s not that France and Germany should dominate,” he added, “but if we can’t find a way together it might be an issue.” |
| That theme was repeatedly invoked during the three-day meeting by Le Cercle des Économistes as top European policy makers and economists addressed what has become the most urgent concern about Europe: that for all the steps taken to put crisis-stricken countries on a path toward renewed growth, the recovery is still unfolding much too slowly. | That theme was repeatedly invoked during the three-day meeting by Le Cercle des Économistes as top European policy makers and economists addressed what has become the most urgent concern about Europe: that for all the steps taken to put crisis-stricken countries on a path toward renewed growth, the recovery is still unfolding much too slowly. |
| Christine Lagarde, managing director of the International Monetary Fund, hinted on Sunday that the fund’s economic forecasts for Europe might be cut amid signs that the growth potential of numerous countries was weakening. | Christine Lagarde, managing director of the International Monetary Fund, hinted on Sunday that the fund’s economic forecasts for Europe might be cut amid signs that the growth potential of numerous countries was weakening. |
| “The global economy is gathering speed, though the pace may be a bit less than we previously predicted,” Ms. Lagarde told the conference. She added, “We see an investment deficit everywhere.” | “The global economy is gathering speed, though the pace may be a bit less than we previously predicted,” Ms. Lagarde told the conference. She added, “We see an investment deficit everywhere.” |
| Investment in Europe is about 20 percent lower than it was before the crisis unspooled, while public investment — especially along Europe’s southern rim — has been sharply tightened because of budget constraints, she said. | Investment in Europe is about 20 percent lower than it was before the crisis unspooled, while public investment — especially along Europe’s southern rim — has been sharply tightened because of budget constraints, she said. |
| Two years after Germany urged European countries to cut government spending and raise taxes to mend national accounts, policy makers are now discussing the need for shock-and-awe public investment programs, especially infrastructure projects, to offset growth slowdowns that have been deepened by austerity measures. | Two years after Germany urged European countries to cut government spending and raise taxes to mend national accounts, policy makers are now discussing the need for shock-and-awe public investment programs, especially infrastructure projects, to offset growth slowdowns that have been deepened by austerity measures. |
| “There are still post-crisis problems in the euro zone,” said Jacques Mistral, head of economic studies at the French Institute of International Relations. “There is a lot less spending today, so governments have to fill that hole.” | “There are still post-crisis problems in the euro zone,” said Jacques Mistral, head of economic studies at the French Institute of International Relations. “There is a lot less spending today, so governments have to fill that hole.” |
| According to a recent report by the consulting firm PwC, Europe will represent just 10 percent of global infrastructure spending by 2025, falling from around 20 percent a few years ago, while the Asia-Pacific region will represent nearly 60 percent of such spending. | According to a recent report by the consulting firm PwC, Europe will represent just 10 percent of global infrastructure spending by 2025, falling from around 20 percent a few years ago, while the Asia-Pacific region will represent nearly 60 percent of such spending. |
| Like many who gathered here for the conference, Mr. Mistral called for billions of euros in public investments in energy, the environment and technology and high-speed Internet, where a number of countries — France included — sorely lag. | Like many who gathered here for the conference, Mr. Mistral called for billions of euros in public investments in energy, the environment and technology and high-speed Internet, where a number of countries — France included — sorely lag. |
| France has gotten its European partners to allow it to push back a deadline for reducing its budget deficit to 3 percent of gross domestic product, a target the government now plans to reach in 2015. The French president, François Hollande, has called for exempting investment spending from deficit figures as he tries to re-energize France’s economy. | France has gotten its European partners to allow it to push back a deadline for reducing its budget deficit to 3 percent of gross domestic product, a target the government now plans to reach in 2015. The French president, François Hollande, has called for exempting investment spending from deficit figures as he tries to re-energize France’s economy. |
| Michel Sapin, the French finance minister, struck a more reassuring tone about the euro zone’s second-largest economy, amid rising concern that France may be the new “sick man of Europe.” | Michel Sapin, the French finance minister, struck a more reassuring tone about the euro zone’s second-largest economy, amid rising concern that France may be the new “sick man of Europe.” |
| “France is a huge economy in Europe, with a large industrial base and innovation and research,” Mr. Sapin said in an interview. “I don’t see how we can be sick, or at least sick for a long time. We are reacting, we’re lowering costs and taxes for companies, and we’re working for more competitiveness.” | “France is a huge economy in Europe, with a large industrial base and innovation and research,” Mr. Sapin said in an interview. “I don’t see how we can be sick, or at least sick for a long time. We are reacting, we’re lowering costs and taxes for companies, and we’re working for more competitiveness.” |
| Still, Ms. Lagarde warned countries seeking to spend their way out of a downturn not to add to already high national debts — a problem that has been at the heart of the euro zone’s crisis. “If you’re not in a medium-term situation that assures sustainability,” she said, “you can’t undertake major infrastructure investments.” | Still, Ms. Lagarde warned countries seeking to spend their way out of a downturn not to add to already high national debts — a problem that has been at the heart of the euro zone’s crisis. “If you’re not in a medium-term situation that assures sustainability,” she said, “you can’t undertake major infrastructure investments.” |
| “This has to be done on a case-by-case basis,” she added. | “This has to be done on a case-by-case basis,” she added. |