Hollande’s Fiscal Policy “Nonsense”: Austria

The policies favored by the French president “got us into this whole mess in the first place.”

Austria’s finance minister dismissed as “nonsense” newly-elected French president François Hollande’s approach to combatting Europe’s sovereign debt crisis.

“Growth financed by debt? Those are the recipes from the day before yesterday,” the newspaper Oberösterreichische Nachrichten quoted the conservative Maria Fekter as saying.

The arguments that France’s new president François Hollande is putting forward again are nonsense and got us into this whole mess in the first place.

The socialist French president was elected on a promise to shift the emphasis from austerity to “growth” which means: more room for stimulus spending and a more expansionary monetary policy on the part of the European Central Bank.

Hollande also supports the creation of eurobonds which would pool the creditworthiness of eurozone states to enable highly indebted countries in the periphery of the single-currency union to borrow cheaply on credit markets.

Austria, with Finland, Germany and the Netherlands, is opposed to creating eurobonds and insists that the focus should primarily be on fiscal consolidation to restore consumer and investor confidence.

German chancellor Angela Merkel last week made the same point Fekter did. “Growth on credit would just push us right back to the beginning of the crisis and that is why we should not and will not do it,” she told her parliament.

Hollande has the backing of highly indebted member states like Italy and Spain but was reprimanded by the Organization for Economic Cooperation and Development on Tuesday which warned in its annual growth forecast against more borrowing.

“Given the persistent long-term deterioration of public finances, there is no room for discretionary measures to offset the economic weakness without risking an upsurge in financing costs,” the OECD said in its chapter on France.