PARIS: France intensified a showdown with its European Union partners Wednesday by unveiling a "no austerity" budget that aims to bring its deficit within European guidelines two years later than previously promised.
Moving any faster to satisfy the bloc's budget rules, the government said, would weaken the country's already feeble economy.
"No further effort will be demanded of the French because the government - while taking the fiscal responsibility needed to put the country on the right track - rejects austerity," the government said in a statement accompanying the budget.
The announcements amounted to a new challenge of Germany and the austerity movement at a time when France's new economy minister, Emmanuel Macron, has admitted the eurozone's second-largest economy after Germany's is "sick."
The French budget detailed 50 billion euros (about $63 billion) in spending cuts to be made over the next three years, which President Francois Hollande's critics say does amount to an austerity plan.
But as Hollande tries to walk a fine line between promoting economic growth and appeasing European officials who want countries to reduce deficits, less than half of those cuts will be unrolled in the next year.
France is demanding leniency from Brussels to meet EU deficit targets in a bid to avoid slipping into an outright recession, after Paris already missed two deadlines in the last three years. "We have taken the decision to adapt the pace of deficit reduction to the economic situation of the country," Finance Minister Michel Sapin said.
Any additional stagnation or slowdown in the French economy could weigh on a European recovery, which has been alarmingly slow in the wake of the Continent's lengthy debt crisis. Growth in the 18 countries that share the euro ground to a halt in the last quarter, and the region's unemployment rate remains stuck at 11.5 per cent.
By contrast, the US economy appears to be recovering from one of its worst downturns since the 1930s, and unemployment has declined to around 6 per cent from about 10 per cent at its recent peak.
On Wednesday, Sapin warned that France would continue to suffer from slow growth for at least the next three years, with the economy expanding 0.4 per cent this year before reaching a 2 per cent pace only in 2019. But a few hours later, even those forecasts were attacked by the French High Council of Public Finances as being too optimistic.
France is effectively arguing that circumstances justify flouting the eurozone budget rules that it, together with Germany, played a critical role in shaping during the creation of the currency union some 15 years ago.
But with growth weak across the eurozone, France is hardly alone: Last year, Ireland, Spain, Greece and Britain were among those that also failed to comply with the bloc's requirement that budget deficits not exceed 3 per cent of gross domestic product.
Sapin said France's deficit would be around 4.3 per cent of GDP in 2015. Not until 2017 will it fall below the 3 per cent threshold set by the European Union, he said. France's budget deficit has not been within that 3 per cent threshold in a decade.
What is more, Paris said this week government debt would top 2 trillion euros for the first time, representing 95 per cent of GDP, well above the 60 per cent level called for by the European Union.
It is unclear whether the European Commission, which oversees the national budgets of the 28 member states of the European Union, will see France's appeal in a favorable light.
The commission is expected to render a verdict this month on France's blueprint. If France is found to be in breach of the rules, it could face sanctions, including stiff fines, but little more.
Chancellor Angela Merkel of Germany told Prime Minister Manuel Valls last month in Berlin that France had made "very ambitious" plans to rein in public spending, which, at 56 per cent of GDP, is among the highest in eurozone. Still, she said France needed bolder changes to the way its economy functions in order to generate growth and jobs.
Germany has encouraged austerity in other countries, including Ireland, Greece, Spain and Portugal, as a way to keep the euro debt crisis at bay. But many economists believe that crimping spending during a downturn helped slow economic growth, which in turn made it harder for those countries to reduce deficits and debts.
Each of those nations also pledged to carry out so-called structural reforms intended to stoke growth and hiring, including easing rules for hiring and firing workers and opening up protected professions to greater competition.
This week, Hollande took bigger steps in that direction with his budget, which detailed the 50 billion euros in spending cuts over the next three years. They include 21 billion euros in cuts for 2015 that would slash about 9.6 billion euros from the French welfare state, 7.7 billion euros from other government spending, and 3.7 billion euros in spending cuts for municipalities.
The cuts are partly aimed at offsetting 40 billion euros in tax breaks that Hollande promised businesses as part of a so-called "responsibility pact," in which companies will pledge to hire more workers in an effort to reduce a jobless rate that remains stuck around 10 per cent.
This week, the government also unveiled plans to open protected sectors of the economy, including pharmacies and the lucrative notary business, to competition in a bid to generate jobs. But those measure have already prompted a heated political and social backlash.
On Tuesday, nearly all pharmacies and notary agencies in France shuttered, with thousands of employees taking to the streets to protest the changes. Parents and school officials also intend to hold major rallies across France this weekend to protest 700 million euros in planned cuts in family benefits and 3.2 billion euros in health spending cuts.
The proposed cuts deepened a schism within Hollande's Socialist Party, with members of the party's left wing expressing outrage that the president appeared to be pulling away from France's vaunted social welfare model. On Tuesday, Hollande delivered a stern warning to the nation.
"There is no savings plan that is painless," he said in a speech to business leaders at the Elysee Palace. To control France's debt and deficit, "we must make savings," he said. "If you don't hear screaming, that means we aren't saving."
indiatimes.com
Moving any faster to satisfy the bloc's budget rules, the government said, would weaken the country's already feeble economy.
"No further effort will be demanded of the French because the government - while taking the fiscal responsibility needed to put the country on the right track - rejects austerity," the government said in a statement accompanying the budget.
The announcements amounted to a new challenge of Germany and the austerity movement at a time when France's new economy minister, Emmanuel Macron, has admitted the eurozone's second-largest economy after Germany's is "sick."
The French budget detailed 50 billion euros (about $63 billion) in spending cuts to be made over the next three years, which President Francois Hollande's critics say does amount to an austerity plan.
But as Hollande tries to walk a fine line between promoting economic growth and appeasing European officials who want countries to reduce deficits, less than half of those cuts will be unrolled in the next year.
France is demanding leniency from Brussels to meet EU deficit targets in a bid to avoid slipping into an outright recession, after Paris already missed two deadlines in the last three years. "We have taken the decision to adapt the pace of deficit reduction to the economic situation of the country," Finance Minister Michel Sapin said.
Any additional stagnation or slowdown in the French economy could weigh on a European recovery, which has been alarmingly slow in the wake of the Continent's lengthy debt crisis. Growth in the 18 countries that share the euro ground to a halt in the last quarter, and the region's unemployment rate remains stuck at 11.5 per cent.
By contrast, the US economy appears to be recovering from one of its worst downturns since the 1930s, and unemployment has declined to around 6 per cent from about 10 per cent at its recent peak.
On Wednesday, Sapin warned that France would continue to suffer from slow growth for at least the next three years, with the economy expanding 0.4 per cent this year before reaching a 2 per cent pace only in 2019. But a few hours later, even those forecasts were attacked by the French High Council of Public Finances as being too optimistic.
France is effectively arguing that circumstances justify flouting the eurozone budget rules that it, together with Germany, played a critical role in shaping during the creation of the currency union some 15 years ago.
But with growth weak across the eurozone, France is hardly alone: Last year, Ireland, Spain, Greece and Britain were among those that also failed to comply with the bloc's requirement that budget deficits not exceed 3 per cent of gross domestic product.
Sapin said France's deficit would be around 4.3 per cent of GDP in 2015. Not until 2017 will it fall below the 3 per cent threshold set by the European Union, he said. France's budget deficit has not been within that 3 per cent threshold in a decade.
What is more, Paris said this week government debt would top 2 trillion euros for the first time, representing 95 per cent of GDP, well above the 60 per cent level called for by the European Union.
It is unclear whether the European Commission, which oversees the national budgets of the 28 member states of the European Union, will see France's appeal in a favorable light.
The commission is expected to render a verdict this month on France's blueprint. If France is found to be in breach of the rules, it could face sanctions, including stiff fines, but little more.
Chancellor Angela Merkel of Germany told Prime Minister Manuel Valls last month in Berlin that France had made "very ambitious" plans to rein in public spending, which, at 56 per cent of GDP, is among the highest in eurozone. Still, she said France needed bolder changes to the way its economy functions in order to generate growth and jobs.
Germany has encouraged austerity in other countries, including Ireland, Greece, Spain and Portugal, as a way to keep the euro debt crisis at bay. But many economists believe that crimping spending during a downturn helped slow economic growth, which in turn made it harder for those countries to reduce deficits and debts.
Each of those nations also pledged to carry out so-called structural reforms intended to stoke growth and hiring, including easing rules for hiring and firing workers and opening up protected professions to greater competition.
This week, Hollande took bigger steps in that direction with his budget, which detailed the 50 billion euros in spending cuts over the next three years. They include 21 billion euros in cuts for 2015 that would slash about 9.6 billion euros from the French welfare state, 7.7 billion euros from other government spending, and 3.7 billion euros in spending cuts for municipalities.
The cuts are partly aimed at offsetting 40 billion euros in tax breaks that Hollande promised businesses as part of a so-called "responsibility pact," in which companies will pledge to hire more workers in an effort to reduce a jobless rate that remains stuck around 10 per cent.
This week, the government also unveiled plans to open protected sectors of the economy, including pharmacies and the lucrative notary business, to competition in a bid to generate jobs. But those measure have already prompted a heated political and social backlash.
On Tuesday, nearly all pharmacies and notary agencies in France shuttered, with thousands of employees taking to the streets to protest the changes. Parents and school officials also intend to hold major rallies across France this weekend to protest 700 million euros in planned cuts in family benefits and 3.2 billion euros in health spending cuts.
The proposed cuts deepened a schism within Hollande's Socialist Party, with members of the party's left wing expressing outrage that the president appeared to be pulling away from France's vaunted social welfare model. On Tuesday, Hollande delivered a stern warning to the nation.
"There is no savings plan that is painless," he said in a speech to business leaders at the Elysee Palace. To control France's debt and deficit, "we must make savings," he said. "If you don't hear screaming, that means we aren't saving."
indiatimes.com
No comments:
Post a Comment