After weeks of indecision, the French government has finally published an economic plan aimed at reducing its public deficit to 3% of GDP by 2015. EurActiv France reports.
The French Council of Ministers adopted a stability programme for 2014-2017 on April 23. The main objective of the vast budgetary and economic plan is to respect the European treaty requirements on public deficit. This is a significant turnaround for the new French government, which earlier this month indicated that it might try to renegotiate with the EU.
Reducing public deficit to under 3% of GDP by 2015 is not “fetishism or submission”, insisted the French Minister for Finance, Michel Sapin.
Establishing France’s credibility in the Union
“It is our capacity to consolidate our public finances that will confirm our credibility,” claimed Michel Sapin. According to him, credibility is crucial for France to “have weight in Europe”.
The government forecasts an increase of economic growth by 1% this year and 1.7% in 2015, which should reduce public deficit from 4.3% of GDP in 2013 to 3.8% in 2014 and 3% in 2015. These forecasts remain relatively in line with previous governmental targets to reduce the deficit to 2.8% in 2015.
The European Commission had already granted France a two-year extension in 2009, but France looked likely to try renegotiate another extension until French Prime Minister Manuel Valls publicly announced that his government would stand by previous budgetary commitments.
“The rhythm is a bit slower, but we will meet our targets,” confirmed Sapin.
France, like all Eurozone countries, was required to present its stability programme to the European Commission, and did so on April 15. The Commission will give feedback and decide whether to extend a budget discipline procedure against France.
Concerns in Brussels
In early May, Brussels had raised the alarm over a possible slip up in France’s deficit reductions. According to the Commission, France could reduce its public deficit to 3.9% of GDP in 2015, which is still much higher than European targets and treaty requirements.
The government’s stability programme plans to reduce public deficit by implementing an ambitious €50 billion savings plan. As well as cuts that will affect the state, local administrations and health insurance, the French government will also put in place a series of measures to restore the competitiveness of companies, and increase employment through its “responsibility pact”.
>> Read: French public debt at record high
According to the government, the stability pact, and a consolidation of public accounts, will also keep French interest rates low. “A 0.5% increase in interest rates on French debt represents €10 billion of extra charges” warned Michel Sapin.
The government’s proposals, although in line with EU requirements, will put the Socialist Party in a dangerous position only weeks before the European elections. In order to set itself apart from the European People’s Party and its candidate Jean-Claude Juncker, the European Socialist Party is running an anti-austerity campaign.
With an annual deficit of 4.1% of GDP in 2013, France has exceeded budgetary limits established by the Treaty of Maastricht.
The European Commission launched measures to deal with excessive deficit and gave France an extra two years to reduce its public deficit to 3%.
French public debt is almost at 95%. The rate of tax contributions is already at 46%.
France has proposed a stability plan to reduce governmental spending by €50 billion by 2017.?
- 2 June: European Commission will give feedback on France's stability programme
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