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08/12/2016

Hollande pledges €4bn in ‘new savings’ to meet EU deficit target

Euro & Finance

Hollande pledges €4bn in ‘new savings’ to meet EU deficit target

French President François Hollande

[Présidence de la République]

French President François Hollande said Wednesday (4 March) his government would find €4 billion in “new savings” this year to meet demands from Brussels.

“If Brussels asks for 4 billion more to respect our obligations in reducing the public deficit, they will be found with new savings,” said Hollande in an interview with daily Le Parisien.

Last week, the European Commission gave France two more years to bring its deficit under the limit of 3% of GDP, but set strict levels that must be achieved along the way.

The Commission ruled that France’s budget for 2015 would not be enough to achieve a reduction of 0.5 percentage points in the deficit this year, and demanded a further €4 billion in savings.

>> Read: EU gives France to 2017 to cut deficit, Italy, Belgium in clear

Hollande also promised “there will be no tax rises in 2015, 2016 and 2017” and that the process of lowering charges for businesses would continue.

He also criticised tax avoidance efforts by large business groups, such as Total.

“Total, which is the biggest French group, should be the biggest French contributor,” he said.

Background

The European Commission granted France until 2017 to bring its budget deficit below the EU limit of 3% of GDP after Paris missed an already extended 2015 deadline.

In return, Paris must commit to rapid and ambitious economic reforms, the Commission said on 25 February.

Brussels said it expected to receive a new programme of structural reforms from Paris by April, despite the recent adoption of the controversial Macron economic reform bill.

>> Read: Brussels demands more ambitious reforms from France

Since 2001, France had a deficit below 3% only in 2006 and 2007 and has repeatedly missed consolidation deadlines.

Fiscal hawks, including the the German centre-right MEP Herbert Reul (CDU), said they were "disappointed" with the new deadline extension.

>> Read: German centre-right ‘disappointed’ over extension of French deficit deadline

Timeline

  • By mid-April: EU countries, including France, expected to present National Reform Programmes
  • May: EU Commission to present a new set of country-specific recommendations

Further Reading

European Commission