Newspaper article International New York Times

Hollande Puts Blame on Austerity ; French President, Saying Policies Strangled Growth, to Pursue More Stimulus

Newspaper article International New York Times

Hollande Puts Blame on Austerity ; French President, Saying Policies Strangled Growth, to Pursue More Stimulus

Article excerpt

President Francois Hollande, saying the eurozone's budget deficit targets are making growth impossible, vows to pursue stimulus measures instead.

As Europe faces the prospect of its third recession in five years, France is quickly emerging as one of the weakest links among the 18 nations that share the euro.

After months of insisting that a recovery from Europe's long debt crisis was at hand, President Francois Hollande on Wednesday delivered a far bleaker message. He indicated that the austerity policies France had been compelled to adopt to meet the eurozone's budget deficit targets were making growth impossible.

Paris officials say that France -- which has the eurozone's second-largest economy, after Germany's -- will no longer try to meet this year's deficit-reduction targets, to avoid making economic matters worse. Even in abandoning those targets, they indicated that France was unlikely to recover soon from its long period of stagnation or quickly reduce its unemployment rate, which exceeds 10 percent.

"The diagnosis is clear," Mr. Hollande said in an interview published on Wednesday in the French daily Le Monde. "Due to the austerity policies of the last several years, there is a problem of demand throughout Europe, and a growth rate that is not reducing employment."

It was the most public rejection by France of the austerity medicine that Germany has long prescribed for the eurozone -- which even the German chancellor, Angela Merkel, recently acknowledged might be impeding the currency bloc's recovery.

Mr. Hollande summoned his cabinet to the Elysee Palace on Wednesday and announced fresh stimulus measures -- the latest in a string unveiled since January. They included proposals for tax cuts on low-income households and plans to reinvigorate France's moribund housing construction market, where activity recently plunged to a 15- year low.

"We need to go faster and further," Mr. Hollande said in the Le Monde interview. "I want to accelerate reforms to boost growth as fast as possible."

He spoke in the face of signs that the broader eurozone economy is stumbling anew, in contrast to the strong recovery in the United States.

Less than a year after its second recession since the 2008 financial crisis, Europe's currency bloc did not grow in April through June, the European Union's statistical agency reported last week. France registered zero growth for the second straight quarter, after weak growth or even contraction for most of 2013.

France was not the only euro economy to stumble. Italy, where Prime Minister Matteo Renzi has also backed off austerity pledges to spur growth, slid back into a recession in the second quarter. Even in Germany, which had been leading what only a few months ago seemed to be the eurozone's incipient recovery, the economy contracted 0. …

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