French President Francois Hollande disregarded calls to ease austerity, sticking to a plan to trim government spending this year and next in the face of a stalled economy and slumping popularity.
French gross domestic product will expand 0.1 percent this year and 1.2 percent in 2014, while the budget deficit will be 3.7 percent and 2.9 percent of GDP, according to projections Finance Minister Pierre Moscovici presented to cabinet today.
Hitting the budget targets will require Hollande’s Socialist government to trim public spending by 14 billion euros ($18.4 billion) next year, representing an unprecedented effort. For Hollande, whose is less popular than any president since 1981 according to a CSA poll published April 5, the plan is in keeping with a strategy of economic revival before the next election in 2017.
“France is undergoing a recovery effort,” Prime Minister Jean-Marc Ayrault said earlier today on France Inter radio. “It’s a huge undertaking.”
The broad projections don’t constitute a formal budget, although they will be considered by lawmakers over the coming week before being sent to the European Commission as part of France’s commitments under the euro area’s stability pact.
The finance ministry estimates the “structural” budget deficit, or the gap excluding the impact of the economic cycle, at 2 percent of GDP this year and 1 percent next year. The deficit reduction effort will amount to a 1.8 percent cut this year and a 1 percent cut in 2014, under its projections.
Public spending is slated to peak at 56.9 percent of GDP this year, falling to 56.4 percent next year and 53.9 percent in 2017.
Of spending cuts planned for 2014, 7.5 billion euros will come from reducing state spending, 5 billion euros from the social security budget and 1.5 billion euros from cuts by local governments. In addition, new taxes will raise about 6 billion euros, the finance ministry said.
A part of the savings is in the pipeline as part of the overhaul of the pension system for executives agreed on March 14.