European Commission puts France on watch list over trade deficit

The European Commission on Wednesday placed France under "reinforced surveillance", criticising its "lack of competitiveness" and high public debt. Spain and Ireland, who have just come out of eurozone bailouts, were given the same status.

European commissioner Olli Rehn has repeatedly criticised France for everything from taxation to public debt Reuters/Francois Lenoir

France's trade deficit continues to grow, due to loss of export markets, and President François Hollande's efforts to boost competitiveness have had only a limited effect so far, the commission claims, and goes on to say that labour costs are high, reducing company

profits.

Finance Minister Pierre Moscovici and Budget Minister Bernard Cazeneuve promised to continue their efforts to balance the budget after the report was released.

Given that France is Europe's second-largest economy, its problems have implications for the whole eurozone, the commission said.

In February the commission forecast that France's deficit would remain over three per cent for the next two years unless the government takes new measures to tackle it.

Of the 17 countries covered in Wednesday report 14 are in deficit and Italy, Croatia and Slovenia have more serious deficits than France and were also put on the watch list.

Germany, with a trade surplus of more than six per cent since 2007, was criticised for overdependence on exports and urged to stimulate domestic demand.