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Germany, France debate austerity strains

Oct 20 2014 13:11

Berlin - Germany and France are to debate their differences over austerity and how to revive the slackening eurozone economy at a meeting of finance and economy ministers in Berlin later Monday.

A German newspaper reported that Paris was offering Berlin a deal: France would slash fiscal spending, if Germany increased "investment" by its government by the same amount, something that could only be achieved by borrowing.

The Frankfurter Allgemeine Zeitung said Finance Minister Michel Sapin and Economy Minister Emmanuel Macron explained in an interview the trade-off could involve €50bn in a three-year period for each side. But it noted Germany was unlikely to bite at the bait.

A spokesperson for German Finance Minister Wolfgang Schaeuble cast doubt on whether such a proposal existed, referring to French news reports Monday that Sapin had described the notion of a pact as "simplistic."

"We are mainly going to be talking about how we can stimulate investment," said Schaueble's spokesperson Martin Jaeger in Berlin.

The two countries are the heavyweights of the eurozone, where fears of recession are growing.

Macron and German Economics Minister Sigmar Gabriel earlier commissioned a joint report from two independent economists on potential reforms in both countries that could revive the economy.

Berlin insists that liberalizing rules that hobble new businesses is the best route out of recession.

France's public deficit is set to breach a limit under eurozone rules of 3% of GDP in the next two years. Germany is eager to impose austerity throughout the eurozone and freeze or reduce debt.

Macron, a 36-year-old former Rothschild banker, was brought into the government in August to boost the government's reform credentials.

He has vowed to tackle what he calls France's "three illnesses" - a lack of confidence in the French economy, excessive regulation and the power of vested interests. France has not, the government insists, converted to austerity.



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