France to tell Germany "we'll reform at our pace"

PARIS Tue Nov 13, 2012 4:14pm GMT

France's Prime Minister Jean-Marc Ayrault poses for photographers prior to an interview during the evening broadcast news of French TV channel TF1 in Boulogne-Billancourt, near Paris, November 6, 2012. REUTERS/Thibault Camus/Pool

France's Prime Minister Jean-Marc Ayrault poses for photographers prior to an interview during the evening broadcast news of French TV channel TF1 in Boulogne-Billancourt, near Paris, November 6, 2012.

Credit: Reuters/Thibault Camus/Pool

PARIS (Reuters) - The French prime minister will tell German Chancellor Angela Merkel this week that France will reform at its own pace, in response to reports that Berlin is worried too little is being done to revive Europe's second-biggest economy.

Premier Jean-Marc Ayrault, a fluent German speaker, will have an hour-long private meeting with Merkel in Berlin on Thursday to defend France's economic policy after reports Germany fears newly unveiled measures to bolster French competitiveness do not go far enough.

"The idea is to explain that France is reforming -- but at our own pace," Jacques-Pierre Gougeon, an advisor to Ayrault who is preparing his trip to Berlin, told Reuters.

"We cannot have the same reform in all countries. But France is evolving and changing," he said.

German officials told Reuters last week that Finance Minister Wolfgang Schaeuble has asked a panel of advisers to examine Socialist President Francois Hollande's reform plans, concerned that France's economic malaise could impact the wider currency bloc.

Despite denials that any such request was made, the report has fanned talk of growing tensions between Berlin and Paris since Hollande came to power in May and immediately challenged Merkel's focus on austerity-only policies.

French European Affairs Minister Bernard Cazeneuve denied any spat on Tuesday, telling a briefing with foreign media that Franco-German relations remained solid, despite widespread concerns that France may miss its 2013 de1ficit target.

"Mr. Schaeuble is worried about growth in France. Well so are we. We're not going to disagree on that," Cazeneuve said. "It's a relation of trust and depth, it's frank and direct and you won't find a German official who will tell you the contrary."

Hollande is under intense pressure to overhaul an economy that is steadily losing competitiveness on global export markets relative to Germany and to southern European countries that have enacted far-reaching measures in the euro crisis.

Industry heads say high labor costs and rigid hiring and firing rules give them a disadvantage to foreign rivals.

Ayrault last week unveiled a set of measures, including the granting of 20 billion euros ($25 billion) in annual tax credits to companies, in response to a review on industrial competitiveness that urged cuts in labor costs.

Business leaders, smarting from increases in corporate taxes in Hollande's 2013 budget, said the measures went in the right direction but fell short of the 30 billion euros in direct cuts to labor charges that they had hoped for. ($1 = 0.7867 euros) (Reporting by Catherine Bremer; Editing by Giles Elgood)