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EU praises 'necessary' French reforms

Published: 04 Jan 2013 16:14 GMT+01:00
Updated: 04 Jan 2013 16:14 GMT+01:00

"We welcome these announcements," a spokesman for EU Economic Affairs Commissioner Olli Rehn said, referring to pro-growth and reform statements by French President Francois Hollande and Prime Minister Jean-Marc Ayrault.

"These structural reforms are necessary to make up for the loss of competitiveness by the French economy," Simon O'Connor said.

Faced with an economy on the brink of recession and rising unemployment, Hollande is betting on a mixture of reforms and public investment to give a boost amid an uproar over proposed tax hikes, especially on the rich.   

France's 2013 budget is based on meeting the EU public deficit limit of 3.0 percent of gross domestic product, as required by Brussels, but with growth expected to fall short of forecasts, many analysts doubt that this is now possible.

Last month, Rehn told French daily Le Monde in December that Paris could ease up on austerity to focus on growth, higlighting the "structural budget adjustment effort which France is making with remarkable intensity."

He said: "Once you have a credible medium-term budget strategy, backed up by reforms, you can have a slower adjustment." This was a reference to the 3.0-percent target.

His comments were widely taken to mean that Brussels might allow France an extension but O'Connor said this "was not the right interpretation."

At the same time, he noted that the EU had recently allowed Spain and bailed-out Portugal an extra year to meet their targets.

Such flexibility proved that the Commission "is focusing on the structural efforts (being made) and not on the nominal targets," O'Connor added.

Most EU member states have failed to keep their annual public deficit below the EU limit and the debt crisis has only made the position worse.

After focusing on austerity, which many have blamed for exacerbating the economic downturn, Brussels has recently put the emphasis on growth, offering governments some room for manoeuvre.

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