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DEBT

France will meet deficit reduction targets: PM

Prime Minister Francois Fillon insisted on Monday that France will meet its pledges to bring its public deficit back within EU limits.

France will meet deficit reduction targets: PM
EPP (File)

“I want to reassure the European Commission that our promises will be met,” Fillon said during a visit to a factory in western France.

Last week the French government announced €7 billion ($9.5 billion) in cuts or new revenue to the budget, following a €12-billion austerity plan announced in August.

Overall the government announced €65 billion in cuts and tax rises through 2015 to clean up France’s books and preserve its precious “AAA” credit rating.

France is trying to reduce its public deficit from 5.7 percent of gross domestic product this year to 4.5 percent in 2012. It is hoping to reach the European Union limit of 3.0 percent in 2013 and balance the budget in 2016.

However, in its latest forecasts issued last week the European Commission said France risks having its public deficit come in at 5.1 percent in 2013 instead of the 3.0 percent target unless measures beyond those announced are taken.

He said the 2012 budget has 6.0 billion euros in reserve to help make sure it makes the deficit reduction target if growth falls below the 1.0 percent it is forecasting.

The European Commission forecast 0.6 percent growth for France next year.

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ECONOMY

IMF urges France to step up spending reforms to rein in debt

The International Monetary Fund on Monday warned France that its public debt is "too high for comfort", calling on the nation to tackle the issue by stepping up spending reforms.

IMF urges France to step up spending reforms to rein in debt
'Yellow vests' protest in front of the stock exchange in Paris in opposition to Macron's policies. Photo: AFP
In a report outlining preliminary findings of its 2019 mission, the IMF said tax and labour market reforms had helped keep the economy resilient despite slowing growth.
   
But it urged the government of President Emmanuel Macron to find further ways to curb spending and to ensure the measures have public support, in a nation rocked by weekly anti-government “yellow vest” protests. 
   
“France's public debt is too high for comfort,” said the IMF mission's concluding statement.
   
“While there is no immediate risk, as the currently low interest rates suggest that higher debt can be sustained at this juncture, the elevated debt level provides little comfort from a medium and long-term perspective.”
 
French public debt rises above €2,000,000,000,000 Photo: AFP
 
The IMF noted that public debt has risen from around 20 percent of gross domestic product in the 1980s to close to 100 percent. 
   
“Additional spending reforms are needed to ensure that the ongoing tax-burden reduction can be sustained and public debt placed on a firm downward path,” the statement said. 
   
The IMF maintained its growth forecast for France at 1.3 percent this year, predicting it would “stabilise at around 1.5 percent in the medium term, predicated on a recovery of domestic and external demand and on gains from recent reforms”.
   
It added that while the current outlook is positive, “risks have risen”, citing global trade tensions, the uncertainty over Britain's exit from the European Union and “in France, erosion of support for necessary economic reforms among the general public”.
 
On coming to power in 2017, Macron immediately set about trimming the deficit to bring it in line with an EU limit of three percent of GDP, which the eurozone's second-biggest economy had persistently flouted for a decade.
   
In March the national statistics agency Insee said France's budget deficit fell to a 12-year low of 2.5 percent of GDP in 2018, a greater-than-expected decline achieved despite falling growth and purchasing power.
   
But the announcement came after months of yellow vest protests, sparked last November over plans to increase diesel prices and raise taxes on pensions. 
   
Macron announced a package of tax cuts and income top-ups worth 10 billion euros in December, following the first month of the protests.
   
And in April, the government announced new plans for fresh tax cuts, to be funded by axing corporate tax breaks, reducing public spending and introducing longer working hours.
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