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France warns of spending cuts ahead of summit
February 6, 2013, 5:19 pm

French President Francois Hollande. [Getty images]

Hollande is likely to clash with Germany over eurozone currency exchange. [Getty images]

Francois Hollande, the French President, has been urging other countries at the European Parliament to seek alternatives to the severe austerity measures many face to pull the continent out of its recession.

“There can be no respite as long as one out of two people is out of work in some countries. I refuse to condemn Europe to austerity without end,” he said.

In response to claims that some countries, such as Japan, were allegedly manipulating their currencies in a bid to boost their economies, Hollande urged changes to the way the eurozone exchange rates are managed.

“The euro should not fluctuate according to the mood of the markets,” Hollande said. “A monetary zone must have an exchange rate policy. If not it will be subjected to an exchange rate that does not reflect the real state of the economy.”

His statements are likely to upset German officials. At the sidelines of the World Economic Forum in Davos, Switzerland last week, Angela Merkel, the German Chancellor chided Japan and other countries for igniting a currency war.

“I don’t want to say that I look towards Japan completely without concern at the moment,” she told journalists. “It is known that in Germany we are of the opinion that central banks are not there to clean up political bad decisions and a lack of competitiveness.”

In the meantime, Hollande warned against excessive requests to slim down the European Union budget during a monetary summit which begins tomorrow.

Hollande said there was room for spending cuts but not at the price of sacrificing the agricultural sector.

The French President’s remarks come as reports continue that Europe has not yet fully recovered from its recession.

Last week, French officials said they would cut by about half their 2013 economic growth forecast.

The French revision from 0.8 to about 0.4 per cent growth echoes forecasts previously made by the IMF.

In its revised World Economic Outlook, the IMF said that while the global economy would grow 3.5 per cent, the 17-nation eurozone would contract by 0.2 per cent.

Initial forecasts had the eurozone growing by 0.2 per cent.

European economic powerhouse, Germany, revised its growth figures from 1 per cent to 0.4 per cent.

Sources: Agencies