France Looking for Spending Cuts to Pare Deficit, Moscovici Says
The French government wants to focus on spending cuts to trim the budget deficit in the face of a stalled economy and pressure from the European Commission to meet its target, Finance Minister Pierre Moscovici said.
Prime Minister Jean-Marc Ayrault will send instructions to ministries within two weeks explaining the need for spending cuts, his spokesman said today. Ayrault said last week that France wouldn’t make its 2013 deficit goal following a government report that the economy shrank in the fourth quarter after falling into recession earlier in the year.
“If we have a deeper recession, we’ll have an even tougher time hitting our targets,” Moscovici told journalists today in Paris. “We should not add austerity to the recession that’s already out there.”
President Francois Hollande is trying to balance the need meet France’s commitments to its partners in the region without pushing Europe’s second-largest economy more deeply into recession or triggering a political backlash. Housing Minister Cecile Duflot said yesterday that Hollande can’t only look to spending cuts to make up a shortfall.
Moscovici said today that the commission, which oversees national budgets among the 17 countries using the euro, should give more importance to “structural” deficits that exclude the impact of recessions than the nominal targets.
France had targeted a budget deficit for this year of 3 percent of gross domestic product.
Hollande’s government is reducing the structural shortfall by about 2 percentage points of GDP this year and aims to trim state spending to 53 percent of GDP by 2017, he said.
The government is also being careful on any plan to re- introduce a 75 percent tax on earnings over 1 million euros ($1.34 million) after it was struck down by courts.
“The 75 percent tax is an important reform,” Moscovici said. “It’s an exceptional tax for exceptional times on exceptional income for an exceptional duration. I’d like to do a 75 percent but if we can’t we won’t do it. I don’t want another sanction.”
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