23 April 2014

France to slow deficit reduction plan

France outlined a slower roadmap on Wednesday to reduce its chronic deficit to the European Union's treaty limit next year, based on growth assumptions described by an independent watchdog as risky.

Europe's second-biggest economy, with the highest public spending quota in the EU, is a serial laggard where recovery and public finances are concerned.

It has already been granted a two-year extension until 2015 on the original deadline to bring its public deficit below the ceiling of 3 per cent GDP.

Its partners fear it may miss the deadline again next year, but an unpopular Socialist government is struggling to sell painful savings measures to the electorate and to rebellious rank and file lawmakers, even though they are milder than outright spending cuts in many other European countries.

Hollande came face-to-face with angry voters during a visit to the southern town of Carmaux after locals had draped a banner saying "No to austerity" over a statue of the founding father of French socialism, Jean Jaures.

"You haven't kept your promises," one woman told the president as he stopped in front of her house. Some people jeered and whistled in disapproval.

In a speech, Hollande said he had "understood" voter frustrations but he argued that France had little choice but to curb spending, become more competitive and work with Europe.

The government raised its official forecasts for the deficit for this year and next by 0.2 points to 3.8 per cent and 3.0 per cent of GDP respectively.

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© Reuters