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PARIS Dec 14 France must pursue economic
reforms to redress its flagging competitiveness and can no
longer rely on raising taxes to shore up public finances, as
companies need fiscal stability to invest, European Central Bank
President Mario Draghi said on Sunday.
"Big efforts have been made, what's important is to continue
on the path of reforms," Draghi told weekly newspaper Le Journal
du Dimanche. "Competitiveness remains insufficient and
strengthening public finances can no longer rely on tax
Socialist President Francois Hollande's government has
launched a reform of the pension system and overhauled rigid
labour rules to stimulate hiring. But efforts to cut the public
deficit have so far relied largely on tax increases.
"France must regain fiscal stability so that companies can
start investing again," he said.
Despite reform efforts, unemployment in Europe's second
largest economy is stuck at 11 percent and gross domestic
product contracted 0.1 percent in the third quarter, versus 0.3
percent growth in Germany.
But the Bank of France sees the economy gathering steam in
the fourth quarter with growth of 0.5 percent. The Insee
statistics office sees growth at 0.4 percent in the same period.
In the wider euro zone economy, Draghi said that uncertainty
was diminishing, which should help to stimulate investment and
encourage European banks to lend more freely, thanks partly to
the ECB's accommodating monetary policy.
"Uncertainties are retreating, which should help to launch
investment and encourage banks to lend," he said.
Asked if the ECB would act to stimulate growth in the euro
zone, Draghi added: "We are always ready and able to act at a
later date. ... Today we remain determined to maintain price
stability and to protect the integrity of the euro."
The ECB chief identified unemployment as the No. 1 problem
facing European governments and pressed the leaders of indebted
member states such as Greece to pursue tough structural reforms
to regain growth.
EU paymaster Germany should act to stimulate investment,
particularly in infrastructure, to maintain its economic
strength following a wave of structural reforms conducted in the
early 2000s, he said.
Europe should fear neither inflation nor deflation, Draghi
said, although he added that a strong euro-dollar exchange rate
had consequences on growth and inflation in the currency bloc.
A top priority for euro zone leaders was to make progress on
a banking union to ensure the stability of the financial system.
"We must first make progress on banking union and complete
reform programmes and deficit reduction efforts that we have
started," Draghi said.
(Reporting by Nicholas Vinocur; Editing by Peter Cooney)