France has ‘no choice’ but to freeze benefits

France has 'no choice' but to freeze benefits
File photo of the Banque de France, the French central bank. Photo: Mbzt/Wikimedia
French central bank governor Christian Noyer said on Wednesday that France should freeze pensions, civil servant salaries and social benefits to save €40 billion by 2014 as it tries to cut a swollen public deficit and jumpstart growth.

Noyer told Europe 1 radio that France had to come up with €40 billion in savings this year and next, to reach the EU deficit limit of 3.0 percent of gross domestic product (GDP), saying Paris had to have "the same level of spending" in 2014 as in 2012.

Since spending would normally increase on its own by €40 billion, "we have to find 40 billion in savings," he noted.

That would require an effort across the board, and specifically, that meant "freezing pensions, and extending a freeze on civil servant salaries and social benefits," the central bank chief said.

"We are not in austerity, we are confronted today with the need for a very strict management of the public finances because our public deficit is too high," Noyer explained.

"Generally speaking, we don't have any choice. We cannot continue expanding the deficits and debt and dumping it on future generations," he insisted.

The central bank chief also maintained that growth of the eurozone's second biggest economy would come via structural reform of the labour market, as opposed to easing fiscal discipline, as has been suggested by several French ministers.

On Tuesday, the Bank of France confirmed its forecast for first-quarter GDP growth of just 0.1 percent.

Economy Minister Pierre Moscovici has indicated that the government now anticipates full-year growth at the same level, compared to its previous outlook for a 0.8-percent expansion.

That means France will not be able to bring the public deficit down to 3.0 percent of GDP this year, as it had pledged to do.

Member comments

Become a Member to leave a comment.Or login here.