French Lawmakers Endorse Constitutional Rule on Balanced Budgets
French lawmakers endorsed a constitutional balanced-budget measure, mirroring German efforts to limit deficit spending and an effort to maintain its AAA rating.
The rule, approved in a voice vote in the lower house today after Senate passage July 11, now needs final ratification, either in a referendum or by a vote of at least 60 percent of the two chambers. The opposition Socialist Party has said it would vote against the measure.
French President Nicolas Sarkozy introduced the balanced- budget law as investors questioned France’s ability to maintain its top credit rating amid the European debt crisis. The proposed “golden rule” will demand all future governments set out three-year plans to balance budgets.
“This is the tangible proof that France wants to restore public finances,” Budget Minister Valerie Pecresse told I-Tele today. “It’s for our credibility, it helps reassure our partners.” Pecresse noted France has not submitted a balanced budget for the last 35 years.
Standard & Poor’s said June 10 France needs to stick to plans to cut its budget deficit and push through changes to its health and pension systems to avoid risking its top credit rating.
Sarkozy cut the budget deficit to 7 percent of gross domestic product last year. His government promised its European partners last month that the shortfall will drop to 5.7 percent this year, 4.6 percent in 2012 and to within the European Union’s 3 percent limit in 2013.
“French authorities will likely continue to introduce policies to contain the future budgetary impact of the population’s aging,” S&P said last month. “If France were to balance its general government deficit by 2016, future net indebtedness would improve sufficiently for us to maintain our AAA rating on the sovereign almost through to 2050.”
To contact the reporter on this story: Helene Fouquet in Paris at hfouquet1@bloomberg.net
To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net
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