WASHINGTON (Reuters) - Europe’s monetary union is no longer in question as it was last year, French Finance Minister Pierre Moscovici said on Thursday, even though the continent’s economic struggles continue.
“There is still an economic crisis in Europe, it is a crisis of insufficient growth. There is no longer a crisis of the euro zone,” Moscovici said, adding that the European Central Bank’s pledge to do whatever it takes to safeguard the single currency had been a big help.
Moscovici said France’s economy suffers from stagnation, which makes it a bad idea to impose additional short-term spending cuts in the name of budget reduction.
“In the second year of recession in the euro zone, it would not be reasonable to add austerity to the recession,” he told reporters at a press briefing following meetings of the Group of 20 nations and the International Monetary Fund in Washington.
He added that European sentiment was improving and that worries about countries exiting the euro zone had receded.
“There is no longer a northern Europe and a southern Europe, a virtuous Europe and a lax Europe,” he said. “There is everywhere a preoccupation, which has contributed to saving the euro zone, to resolve the delicate situations of which we know - Spain, Italy, Greece, Cyprus - and at the same time to define a common agenda for growth.”
Fears of a euro zone breakup returned to centre stage recently after a bailout of Cypriot banks that hit depositors raised worries about contagion.
Moscovici said the French financial system was on sound footing, adding that he favours a drive toward a full-fledged European banking union.
“The French financial system has been evaluated. It is a robust, solid, well-calibrated system,” he said.
Earlier this week, France’s new fiscal watchdog said the country’s economy could contract this year and grow by less than expected in the following four years.
The government is basing its fiscal program on growth forecasts of 0.1 percent of GDP for this year, 1.2 percent next year and 2 percent on average in 2015-2017. But the oversight body saw risks linked to the economic outlook in Europe and weak domestic demand.
“A slight contraction of GDP in 2013 and growth well below 1.2 percent in 2014 cannot be ruled out,” it said in a report.
Editing by Xavier Briand