German finance minister backs French push for pro-growth investment

By Leigh Thomas and Michel Rose

PARIS (Reuters) – German Finance Minister Wolfgang Schaeuble on Thursday backed French President Francois Hollande’s calls for greater investment to boost growth in Europe, hours after Hollande called for a euro zone summit to coordinate pro-growth measures.

France has for months called for Germany, Europe, and the bloc’s central bank to do more to boost investment and growth in the euro zone, but had so far largely faced reluctance from EU-powerhouse Germany.

“We can’t deny that some geopolitical risks are currently playing a very important role,” Schaeuble told a news conference with French counterpart Michel Sapin in Paris, adding that it was important to boost investment given weakening growth.

“There are signs of a certain economic slowdown. That’s why its important to stay the course,” on investment, he said.

After pushing for austerity in Europe for the past four years, Germany is showing clemency towards its closest ally, France, encouraged by its new government’s commitment to reforms and spending cuts.

Asked to respond to a call earlier on Thursday by Hollande for a euro zone summit to come up with pro-growth measures, Schaeuble said it was right that European leaders addressed the bloc’s economic situation. He also said he was “pushing in the same direction” as Hollande on boosting growth via investments.

But asked to comment on repeated French calls for weaker euro, Schaeuble said exchange rates should be set by markets.

National governments must live up to their commitments, Schaeuble said, keeping the pressure for reforms.

“Yes, progress is being made in Europe, but there are also certain causes for concern,” he said. “We know that everyone in their country must fulfil their commitments .. France and Germany have a particular responsibility in Europe.”

Hollande had said earlier on Thursday low inflation in Europe and an overvalued euro threatened a protracted stagnation, and called for an early euro zone summit to coordinate pro-growth measures.

“The recovery is too weak. Inflation is too low. The euro is too high,” he told an annual ambassador’s conference. “Europe is threatened by a long and possibly interminable stagnation if we do nothing.”

Two captains of French industry backed Hollande’s calls for euro-zone policy makers to act more forcefully to lower the euro’s exchange rate to make European firms more competitive.

“I think nobody wants a euro that is manipulated, but we can’t be satisfied with a situation where the euro would be the only currency on which politicians can’t talk about,” Louis Gallois, the head of the supervisory board of French carmaker PSA Peugeot Citroen told a conference.

The euro was last trading at $1.3174 on Thursday, a more than one-year low. Selling of the euro, which traded at nearly $1.40 in May, has been driven over the last week by stepped-up speculation that European policymakers will quicken monetary loosening as a way to boost economic growth.

The CEO of Franco-Dutch airline group Air France-KLM Alexandre de Juniac joined Gallois in demanding a more “offensive” approach to the euro-zone’s exchange rate policy.

“The euro is a tool of global calibre … Let’s use our exchange rate policy,” he said.

(Additional reporting by Alexandria Sage; Writing by Ingrid Melander; editing by Mark John)

German finance minister backs French push for pro-growth investment