Bloomberg News

Hollande Criticism Shows He Doesn’t Get It: Merkel Ally

April 27, 2012

Frontrunner in the French presidential race Francois Hollande. Photographer: Balint Porneczi/Bloomberg

Frontrunner in the French presidential race Francois Hollande. Photographer: Balint Porneczi/Bloomberg

Francois Hollande’s stepped-up attacks on Chancellor Angela Merkel’s belt-tightening solution to Europe’s crisis show he doesn’t understand his country’s economic shortcomings, an aide to the German leader said.

The intensifying war of words between the French presidential race frontrunner and Merkel is putting the two politicians from Europe’s two largest economies on a collision course over ending the region’s sovereign debt crisis.

“It’s not for Germany to decide for the rest of Europe,” Hollande said late yesterday on France 2 television, prompting Michael Meister, the deputy caucus chairman of Merkel’s Christian Democrats, to say in a phone interview today that “Herr Hollande has misunderstood the problems in his country and in other euro area countries.”

The French Socialist candidate wants to renegotiate the fiscal pact agreed to by leaders of 25 European nations, and has said if he’s elected France won’t ratify it without a component on spurring growth. For her part, Merkel has reiterated her budget-cutting message in the face of rising criticism of Germany’s focus on austerity.

Since beating President Nicolas Sarkozy in the first round of France’s presidential election on April 22, Hollande has stepped up his push against austerity in favor of growth. Although Hollande has said he will balance the budget by 2017, he wants to hire 60,000 teachers and public school employees and 5,000 police officers over the next five years and pull back the retirement age to 60 from 62 for some people.

Pumping Money

“If one throws money into a country with structural problems that won’t solve those structural problems,” Meister said today. “In fact, one makes the problems worse.”

Merkel’s government “strictly” opposes “pumping more money into economies,” he said. “It would more likely make the implementation of the fiscal compact more difficult. The aim is to gain control over excessive debt, not increase it.’’

While European Central Bank President Mario Draghi this week called for a “growth compact” to follow the fiscal pact, he made clear he wants structural changes and competitiveness, not additional spending. Hollande said yesterday that he disagrees with Draghi’s methods for fueling economic growth.

Spain, whose sovereign credit rating was yesterday cut for the second time this year by Standard & Poor’s, is sticking to its line that austerity should be the main driver of policy as it tries to quash concern that it will be pushed to follow Ireland, Portugal and Greece into a bailout.

Spanish Resolve

Spanish Economy Minister Luis de Guindos said in an interview yesterday that Europe can’t afford to twin the fiscal treaty with stimulus measures.

“A growth pact has to be focused on structural reforms,” he said. “I do not see that the growth pact should involve any sort of fiscal boost or stimulus.”

Merkel said again yesterday that excessive debt robs countries of their independence. Too much debt “harms countries’ ability to make their own decisions, so that they’re more and more dependent on the markets, and have to step up savings and make harsher cuts,” Merkel said in Flensburg, northern Germany.

Germany, Europe’s largest economy, has championed debt reduction as the key to ending the region’s more than two-year- old financial crisis.

The national debt burden in Germany will fall to 78.9 percent of gross domestic product this year, while it will climb to 89 percent in France, the International Monetary Fund says.

German Strength

Germany has an unemployment rate of 6.7 percent, compared with 9.8 percent in France, the region’s No. 2 economy.

The French government will stick to its target of balancing its budget by 2016 if he’s re-elected, Sarkozy said yesterday.

“Do you think it’s by hiring 60,000 civil servants that we will create growth?” Sarkozy said on France 2 television last night. “Do you think we can keep spending money we don’t have?”

Even so, Hollande is counting on the support of the French electorate to boost his bargaining power on the European stage.

“The debate is shifting,” Hollande said today on RTL radio. “Not only has the ECB president addressed this but the president of the European Council has said he’s ready to prepare” for changes, he said.

European Union President Herman Van Rompuy said yesterday that he might help prepare for a June 28-29 summit of the bloc’s leaders with an invitation to an “informal” dinner at an earlier date.

‘Not Any Country’

Speaking yesterday in Brussels, Van Rompuy also said that the EU has “hardly any room for fiscal stimulus” and that “structural reforms remain the main lever at our disposal.”

Meanwhile, polls consistently show Hollande leading Sarkozy in the final days before the decisive round of the nation’s May 6 election. The Socialist lawmaker got 28.6 percent in the first round of the election, while Sarkozy won 27.2 percent.

Hollande will beat Sarkozy by 56 percent to 44 percent in the final round, according to surveys by polling companies CSA and Harris Interactive. (HPOL:US)

“We’re not just any country,” Hollande said. “We can change the situation in Europe.”

To contact the reporters on this story: Helene Fouquet in Paris at hfouquet1@bloomberg.net; Mark Deen in Paris at markdeen@bloomberg.net

To contact the editor responsible for this story: Vidya Root at vroot@bloomberg.net


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