France Sets Out Spending Cuts as Hollande Girds for EU CriticismMark Deen
President Francois Hollande’s cabinet approved France’s 2015 budget today, detailing spending cuts to preempt criticism from the European Union about its widening budget deficit.
Spending will be reduced by 21 billion euros ($26 billion) next year, with 16 out of 30 ministries ranging from agriculture to sports receiving smaller budgets and further savings being sought in the social security system and from local governments.
With the economy stalled and tax receipts disappointing, Hollande is struggling to contain the deficit in line with EU rules. Still, Finance Minister Michel Sapin said today that France had met its commitments to pare spending and that European governments need to consider what they can do as a bloc to bolster growth.
“All the efforts asked of France have been done,” Sapin told journalists in Paris. “The question is not France and Europe, it’s Europe. What can we do to have strong growth in Europe? The European Central Bank has acted, now what can we do on the budget side?”
France’s budget deficit will rise for the first time in five years this year, reaching equivalent of 4.4 percent of gross domestic product from 4.3 percent last year. Next year the shortfall will barely improve, with the deficit again at about 4.3 percent of GDP.
In April, France had pledged to reduce its deficit to 3.8 percent this year and 3.0 percent in 2015. Since then growth has disappointed and inflation has dropped to a fraction of the ECB’s target, making the original goal unachievable.
The government now expects the economy to expand 0.4 percent this year and 1.0 percent in 2015. That’s down from forecasts of 1.0 percent and 1.7 percent made earlier in the year. Sapin first provided the most recent deficit and growth forecasts on Sept. 10. He left them unchanged today.