French growth may top OECD target: Finance minister
Economic growth in France may exceed the Organization for Economic Co-operation and Development’s (OECD) 0.4 percent target this year, finance minister Michel Sapin told CNBC over the weekend.
“The last figures for the third-quarter are figures that fill me with trust. This year, France will reach the 0.4 percent [target], maybe it will actually overcome it a little bit,” he said on the sidelines of the G-20 summit.
Gross domestic product (GDP) in Europe’s second-largest economy grew 0.3 percent on quarter, a one-year high, during the July-September period. The upbeat report came after the economy contracted in the previous quarter, leading it to be dubbed the “sick man of Europe”.
Still, 0.4 percent growth is not sufficient in the long run, he warned. The OECD projects France will expand at 1 percent in 2015, which Sapin says won’t be enough to deliver tangible gains.
“Even with a 1 – 1.5 percent growth rate, which we hope for very swiftly, we will not be able to decrease unemployment and rebalance our public finances. Structural reforms and appropriate fiscal and structural policy investments are what will allow us to find in France, and in Europe, the growth rate we need to solve the crisis,” he said.
Pressure is mounting on the government to rein in the budget deficit to meet European requirements of 3 percent of GDP by 2015. The deficit is expected to be 4.4 percent of GDP this year. Job creation is also a major priority for the Hollande administration with unemployment firmly above 10 percent
Europe: all about investment
Increased investment is the key to jolting both France and the euro zone back to life, Sapin said.
“Public and private investments in Europe are 18 percent inferior to what they were before the crisis in 2008,” he said. “We need to find again the same level of investment in public infrastructures but also private investments in order to modernize factories, to modernize production processes, to have initiatives, innovation, research around new products.”
Europe will continue to face difficulty as long as investment levels remain below pre-crisis levels, he added.
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Public infrastructure has been a dominant theme at this year’s G-20 summit. Leaders on Sunday endorsed a plan to create a $15 million global infrastructure hub in Sydney to improve the quality of global infrastructure investment.
Meanwhile, European Commission President Jean-Claude Juncker is expected to unveil a 300 billion euro ($375 billion) investment plan before year-end, which could add an additional 0.7 percent of GDP in investment per year over three years.
“[Infrastructure] allows us to stimulate our economy because we start working immediately but also it allows us to deeply modernize our economies in order to allow a better development on the medium and long term,” he said. “France is supporting such projects, especially in the euro zone.”
