Hollande’s growth agenda defies critics

Output by French industry rebounded sharply in April while French and German business optimism jumped, lending some evidence to upbeat claims by President François Hollande that the euro crisis is over.

However unemployment in the eurozone is not expected to drop until next year and there is little sign of a reduction in poverty levels, especially among the hardest hit eurozone countries.

The French head of state has been pushing for the EU to concentrate on growth-enhancing measures following his recent decision to spend €2.5bn over the next five years improving job prospects for poorer people and the youth.

Seen as an embattled and lone voice in the eurozone, Mr Hollande was in Japan where he praised the actions of Prime Minister Shinzo Abe to breath life into an economy that has been moribund for the last decade.

His “Abenomics” — cheaper money, structural reforms and big government spending — is more in tune with the French thinking than the German austerity model ruling in the EU.

The Socialist president is resisting pressure from Berlin to make cuts to government spending with French unemployment at 11% — at a 15-year high — while GDP contracted by 0.2% in the first quarter.

He said in Tokyo that both Japan and Europe had similar challenges and the solution for both lay in boosting growth and regaining confidence. “We must act quickly and efficiently. This is what Shinzo Abe wants for Japan; this is what I want for France. If we work together in Europe and if you, the Japanese, make an effort to participate in this new dynamic, together we can change things,” he told his hosts.

On the first leg of a trip to the Far East to encourage investors to come to France, Mr Hollande told them that fears for the crisis that brought the existence of the single currency into doubt was over.

“I believe that the crisis, far from weakening the eurozone, will strengthen it. Now we have all the instruments for stability and solidarity. There was an improvement in the economic governance of the eurozone, we set up a banking union, we have rules on budgetary matters that allow us to be better co-ordinated and have a form of convergence,” he said.

But critics pointed to the record high number of EU unemployed at close to 19.5m people and the 18-month-long eurozone recession.

The Bank of France said it expects France to return to growth in the second quarter which,despite being marginal at 0.1%, will break the cycle of recession that has gripped the eurozone’s second largest economy for the past six months.

French industry said manufacturing improved by 2.2% in April compared to March and a survey among business leaders showed they expected further improvements this month.

The German Sentix research institute said eurozone investor confidence had risen this month as the economy was expected to return to growth this year and the sovereign debt crisis had passed.

Mr Hollande said he wanted to play a major role in securing the free trade agreement between the EU and Japan. It would be a significant boost to both economies whose trade accounts for about 30% of global GDP.

France is seen as the ‘fly in the ointment’ in the EU-US trade negotiations expected to be approved on Friday as they want to exclude culture from any agreement.