France on Monday announced “new measures” in its budget to reduce the deficit by €3.6 billion ($4.6 billion) in a bid to appease the EU, which has slammed the country for repeatedly exceeding the bloc’s Europe-wide deficit limits.
Paris has said that its deficit will reach 4.3 percent of annual economic output in 2015 – far above the EU’s 3.0 percent limit for member states and an infraction that could prompt Brussels to demand changes to the French budget.
France shocked its European partners in September by going back on a pledge to get its deficit to below the 3 percent ceiling by next year.
Instead, it pushed back meeting this goal to 2017 – the year of the next French presidential election – and put the eurozone’s second-largest economy on a possible collision course with Brussels.
But Finance Minister Michel Sapin said Monday that there was some “good news” – notably a reduction in interest rates that had brought down the cost of financing the country’s debt, which had allowed France to trim its deficit.
“I think that France here is offering clarifications and elements that should allow us to stay on course” with the EU rules, Sapin told reporters.
He stressed that “the main budgetary rule for France is to achieve a reduction of at least 0.5 percentage points of gross domestic product in our structural deficit next year”, he added.
The structural deficit is the core deficit of a country when the ups and downs of the economic cycle have been accounted for.
EU Economic Affairs Commissioner Jyrki Katainen has written to Paris to demand an explanation for repeatedly exceeding the EU deficit limit.
France’s new Economy Minister Emmanuel Macron in September urged immediate reform to tackle an unemployment rate surpassing 10 percent and stagnant growth, saying the French economy is “sick”.
“France is sick. It’s not well. We have to describe the situation as it is,” Macron told French radio.
In another blow to France’s economic confidence, the Standard & Poor’s ratings agency lowered its outlook for France’s credit rating from “stable” to “negative” earlier this month. S&P maintained France’s “AA” status but said the rating could be downgraded within the next two years if France’s government is unable to implement the reforms need to spur growth.
Source: France 24