PARIS: France yesterday announced “unprecedented” cuts in its next budget, admitting it will not meet its EU-mandated deficit target this year and that the economy will do worse than previously expected in 2014.
Despite emerging from a shallow recession in the second quarter, France is struggling to get its tepid economy back on track amid record-high unemployment, limited investment and low consumer spending.
Under pressure from Brussels, Prime Minister Jean-Marc Ayrault said there would be “unprecedented” cuts of ¤15bn ($19.8bn) in the 2014 budget — one billion more than previously indicated by the Socialist government.
“It’s a budget to kickstart job creation, that’s the main battle,” Ayrault said.
Another ¤3bn will be raised through increased taxes, Budget Minister Bernard Cazeneuve said, as government officials unveiled the broad outlines of next year’s public finances.
The Socialists had previously floated the idea of ¤6bn in new taxes, but Finance Minister Pierre Moscovici said there would be no increases in employer payroll or household tax contributions.
Government spokeswoman Najat Vallaud-Belkacem said the focus was on spending cuts over tax increases in order to “ensure competitiveness and allow domestic demand to take off again.”
Economists say France’s high labour costs are making it less competitive in the global economy and consumer spending has fallen in recent years amid the wider eurozone economic crisis.
France’s economy did enjoy higher-than-expected growth in the second quarter — echoing a wider recovery in the eurozone —but there have been no indications of a sustained return to meaningful growth.
Moscovici said the government was lowering its growth forecast for 2014 to 0.9 percent, from a previous prediction of 1.2 percent. It is maintaining its 0.1 percent growth forecast for this year, he said.
AFP
