Hollande Ministers Pledge Less Spending as Deficit Cuts Slow

President Francois Hollande plans to narrow France’s budget gap next year mostly by shrinking spending.

Even as the pace of deficit-reduction slows, 15 billion euros ($19.9 billion) out of the 18 billion-euro narrowing of the budget gap will come from spending cuts, his ministers told journalists in Paris today. The cuts include a 9 billion-euro reduction in state expenditure and a 6 billion-euro drop in social-services spending. New taxes will raise 3 billion euros.

France’s budget shortfall will be 4.1 percent of gross domestic product this year and 3.6 percent in 2014, Finance Minister Pierre Moscovici said. The plans rely on gross domestic product growth of 0.1 percent this year and 0.9 percent in 2014, he added.

“We have one, single ambition: achieving sustainable recovery in 2014,” Moscovici said. “These are prudent forecasts.”

Hollande’s decision to slow the pace of deficit reduction from what was planned earlier this year is in line with an International Monetary Fund call for euro-area nations to shift their focus on growth. Moscovici said they’re in line with the government’s commitment to cut the “structural” shortfall, or the deficit excluding the impact of economic growth. He added that he discussed the plans with European Union Economic Affairs Commissioner Olli Rehn last week in St. Petersburg.

The government plans to shift the taxation of businesses from production to profits, Budget Minister Bernard Cazeneuve said. Full details of the budget plans will be published Sept. 25.

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