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Economists call for reforms in France, investment in Germany

Leading economists think Europe may be falling into a "stagnation trap." In a much anticipated report, they have unveiled a series of initiatives to help revive growth in the eurozone's two biggest economies.

European majors France and Germany must urgently take more action to address the weaknesses in their economies by implementing economic reforms and boosting public investment, according to a top level report released Thursday by two leading European economists.

"In France we fear lack of boldness for decisive reforms. In Germany we fear complacency," stated the joint economic report.

Henrik Enderlein, economist at Germany's Hertie School of Governance, and Jean Pisani-Ferry of France's government think tank France Strategie said much "lip service" was being paid to ambitious projects, but no real steps were being taken to jumpstart the European economy, which has been plagued with high unemployment, sluggish economic growth and dangerously low inflation.

Paris should embrace a more flexible labor market model and ease constraints on employment, the pair said.

They also suggested France should boost efforts to become more competitive and construct a "leaner, more effective state." This would include bringing down public spending below 50 percent of GDP from 56.6 percent in 2014.

Behind the facade

Despite Germany's apparent success, the country faces significant long-term challenges due to a rapidly aging and shrinking population. Berlin should prioritize full-time employment for women and accommodate skilled migrants to staff factories and offices, the economists said.

They also proposed the German government bolster public investment by 24 billion euros ($30 billion) in the next three years - a figure more than twice the planned amount - and create a "German Future Fund" to push forward public-private partnerships in energy, digital and transport projects.

"In contrast to France, where reforms are urgent and specific, the German reform needs are more fundamental in nature, requiring societal transformation and will likely need considerable time for implementation," the economists said.

The unofficial report was commissioned by both Paris and Berlin and is expected to catch the attention of policymakers in both capitals.

el/uhe (Reuters, AFP, dpa)

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