Eurozone crisis calls for joint efforts: analysts

(FRANKFURT) - A growing dispute between France and Germany threatens to split the eurozone even as it endures a historic crisis, but analysts say only cooperation between the old rivals can help heal Europe.

Barbed exchanges continued Tuesday over how eurozone economies should tackle global competition and internal exchanges, with Germany defending its focus on labour reform and trade against charges it neglects domestic consumption.

"If the eurozone really wants to become a functioning economy, these issues will have to be discussed and they will have to be solved at the eurozone level," ING senior economist Carsten Brzeski told AFP.

UniCredit chief economist Marco Annunziata added: "The solution requires stronger German consumption, but that is only part of the solution: other countries have an equally strong responsibility to accelerate structural reforms and boost productivity."

Fast rising wages in Greece, Portugal and Spain have undermined their ability to compete, while German workers have accepted wage moderation in favour of job security.

That came after European countries signed in 2000 the Lisbon Agenda that aimed to make Europe "the most dynamic and competitive knowledge-based economy in the world."

European Energy Commissioner Guenther Oettinger, a German, told the daily Sueddeutsche Zeitung Tuesday: "Europe is confronting stiff competition from Japan, the United States and other economies.

"We need more reforms in Europe, like those carried out in Germany. To turn back on such reforms would be to head in the wrong direction," he said.

On Monday, French Finance Minister Christine Lagarde said Germany's trade surplus came at the expense of eurozone neighbours, and urged Berlin to encourage more domestic consumption.

Lagarde suggested that downward pressure on German wages and a constant drive to increase exports might not be sustainable in the long run and might not benefit the entire 16-nation eurozone.

German Economy Minister Rainer Bruederle sent Paris a clear rebuke.

"For countries, which in the past lived off their entitlements and neglected their competitiveness, to point their finger at others is humanly and politically understandable, but still unfair," he told the Frankfurter Allgemeine newspaper in an interview published on Tuesday.

"The structural reforms needed to regain competitiveness are very painful," he noted in a veiled swipe at Paris.

Lagarde had received backing meanwhile from European Economic and Monetary Affairs Commissioner Olli Rehn from Finland, and Competition Commissioner Joaquin Almunia of Spain.

Rehn said: "Countries with current account surpluses should invite structural reforms that enhance internal demand."

But Annunziata told AFP: "Countries which have experienced very poor productivity growth and relatively fast wage increases over the past few years cannot simply blame German frugality for their problems, as their strategy is equally unsustainable.

"All eurozone countries are also facing an increasingly fierce global competition which is not going to disappear," he said.

"Germany has adapted faster and better than others in terms of productivity and specialization, and other countries will need to improve their response as well."