Post date: May 11, 2013 7:10:10 PM
France's finance minister says the euro zone is switching its focus away from austerity which he claims is "punitive and negative", after a meeting of G7 finance ministers in London.
LOWER HARTWELL, ENGLAND, UNITED KINGDOM (MAY 11, 2013) (REUTERS) - Austerity versus growth was discussed by G7 finance ministers at a two-day summit near London which ended on Saturday (May 11).
The debate has been heating up about the need to ease up on austerity, something that Germany, Britain and Canada view as a mistake but Washington, Paris andRome are in favour of.Chair of the talks, UK finance minister George Osborne declared that the participants "agree on more than most people thought" on this issue.
French finance minister Pierre Moscovici said counties had to reduce their public debt but at an appropriate pace. He said Paris was serious about deficit reduction.
"The will to reduce the deficits is still very much there, but there's certainly a change of tone and, I believe, a change of priority - with rebalancing the priority," he said.
Although he heavily opposed the term "austerity" which has been adopted as a catch-all phrase characterising the British, German and Canadian stance.
"Austerity is a form of impoverishment. It comes back to break the social model. It's a structural over-adjustment. It goes well beyond what is necessary to reduce debt. It's a policy that seems punitive and negative; it's a term I don't use. And I would say something else: for the past year since we've been in charge, we have been fighting austerity. But having said that, our model is as follows: austerity, no; seriousness and credibility, yes," he said.
German finance minister Wolfgang Schaeuble stressed that there were no damaging divisions at the G7 summit on the thorny issue of growth versus austerity.
"We were not under pressure, we are with friends and no one else was under pressure" he told reporters.
The talks gave a green light to Japan's drive to galvanise its economy. As at previous international meetings Japan escaped censure for printing money on scale that has sent the Yen lower, boosting its export market.
Japan said it had been under no pressure at the talks at a country mansion 40 miles outside London, but Schaeuble said there had been intense discussions at that the situation was being monitored closely.
"Of course we talked about Japan with our Japanese colleagues and partners quite intensively and they are carefully monitoring the situation, but they had to do something to kick-start 15 years of deflation to get things moving. We told them that there are already impacts that we can see now and they said they will keep a close eye on it," he said.
Unfinished bank reforms were also discussed, with signs that plans for a euro zone banking union are fraying.
A senior US Treasury official said that the talks zeroed in on the need not just for better bank supervision but also to clean up balance sheets to boost lending.
"There was a sense of urgency among the euro area participants" said the official off-camera.
Schaeuble countered that the euro zone was no longer the main risk to the world economy.
"We talked about the situation within the euro zone and I think it's indisputable that you have to say it sometimes - it is a significant success. In the past few years the global economic analysers always referred to insecurity within the euro zone as the main risk to the global economy. It's not like that."
Germany has come under pressure to support a banking union. The plan could help strengthen the single currency area but Berlin worries it may pay too much for future bank bailouts if it signs up to a scheme to wind up stricken lenders.