Sept. 26 (Bloomberg) -- The European Commission gave its preliminary endorsement to France’s 2014 budget, offering support to President Francois Hollande in the face of domestic concern about high taxes.
“France has made a huge effort to restore its public finances and this draft budget law is characterized by responsibility and prudent policy-making,” European Union Economic and Monetary Affairs Commissioner Olli Rehn said in Brussels today at a press conference with French Finance Minister Pierre Moscovici.
The remarks contrasted with Rehn’s initial reaction to Hollande’s proposals to trim Frence’s pension deficit. Having discussed pensions on Sept. 13 with Moscovici in Vilnius, Lithuania, he mused that with French economic policy “there’s always the question of whether the glass is half full or half empty.”
Hollande’s government is planning a budget deficit of 4.1 percent of gross domestic product this year and 3.6 percent in 2014. While the 2013 forecast is higher than the target set by the commission in May, Rehn praised the plan for its “realistic” assumptions on growth. The budget is based on GDP rising 0.1 percent this year and 0.9 percent next year.
“The forecasts that are the basis of this draft law are very likely to materialize,” he said. “I’m very happy to see that budgetary objectives are in line with the council’s recommendation.”
Of the planned 18 billion-euro ($24.3 billion) cut in the deficit for next year, the government expects 15 billion euros to come from lower spending, while limiting tax increases to 3 billion euros.
“The commission was very clear: we have to put our house in order,” Moscovici said. In 2015, the deficit cut will come “100 percent from spending cuts.”
For Rehn, the priority for Hollande should be boosting French growth by accelerating a revamp of the social system that began with a payroll tax cut and a loosening of labor laws over the past year.
“The ambitious reforms that have been carried out should be reinforced to preserve the growth and competitive potential of French firms,” Rehn said.
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