France will not introduce any further austerity measures this year but instead focus on spending cuts in 2014 to bring its deficit down to three% of GDP that year, French President Francois Hollande said yesterday.
The Europe-wide economic slowdown has forced France to delay its target of cutting the state deficit to three% of GDP this year and the government has said it does not want to impose too much austerity on an economy near recession.
“It would be wrong to take measures that put another brake on consumption and investment,” Hollande said at the annual Paris farm show on yesterday. “There is no need to add more austerity in 2013. A lot has already been asked of the taxpayer.”
He added that while government efforts to reduce the deficit had until now consisted of more tax increases than spending cuts, that trend would be reversed in 2014.
Finance Minister Pierre Moscovici said on Friday that France would ask its EU partners and the European Commission for an extra year to cut its public deficit below a targeted 3% of GDP, and would outline new savings measures soon.
He said said on Friday that he hoped growth “will be greater than 0.1%” and that his country had no desire to “add austerity to the recession” in a bid to narrow the gap between revenue and spending.
Hollande said yesterday his government had brought down the deficit from 5.2% of GDP at the end of 2011 to 4.5% in 2012. The European Commission expects a French 2013 deficit of 3.7% of GDP.
“I admit it is not the 3%, but the movement is going in the right direction, as both the France national audit office and the European Commission recognise,” he said.
Spending cuts in 2014 would be made in the state budget, local budgets and the social security budget, Hollande said, reiterating that the government maintained its longer-term goal of a zero deficit in 2017.
Holland said France would continue to try and boost growth through public investment, notably with funds gathered through tax-free savings books and by state investment companies.
But he was downbeat about jobs, saying that if economic growth in 2013 was not better than the 0.1% the European Commission expects, unemployment would rise further.
“But if forecasts for one or 1.2% growth in 2014 materialise, we will see new job creation again,” he said.
He said his cabinet would focus on jobs for young people.
“When youth unemployment rates in some countries are above 50%, 25% in France, there is a risk of explosion, and I do not want to jeopardise national cohesion” he said.
He said his government expects a report on pension reform to be completed this summer.
That will be followed by talks between unions and employers with a view to implementing pension reforms in 2014.