Newspaper article International New York Times

Stagnation in France Called Threat to Euro Zone ; European Policy Makers Urge Public Investment of Billions to Spur Economy

Newspaper article International New York Times

Stagnation in France Called Threat to Euro Zone ; European Policy Makers Urge Public Investment of Billions to Spur Economy

Article excerpt

The French economy has been hovering too long near stagnation and risks derailing a wider euro zone recovery, a group of economists warned Sunday.

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 on Sunday during an economics conference here, saying that unless the government in Paris pushes more strenuously to improve growth alongside Germany, its performance threatens to weigh on the prospects for a wider recovery in the euro zone.

"The weakness of France is visible," Bertrand Badre, the 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 during the three-day meeting by Le Cercle des Economistes 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-hit countries on a path toward renewed growth, the recovery is still unfolding much too slowly.

Christine Lagarde, the managing director of the International Monetary Fund, hinted on Sunday that the fund's economic forecasts for Europe may be cut amid signs that the growth potential of numerous countries is weakening.

"The global economy is gathering speed, though the pace may be a bit less than we previously predicted," she told the conference. "We see an investment deficit everywhere," she added.

Investment in Europe, especially by corporations, is about 20 percent lower than it had been before the crisis unspooled, while public investment, especially along Europe's southern rim because of budget constraints, has been sharply tightened, she said.

Two years after Germany urged European countries to slash 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. …

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