France Pledges to Improve Budget Credibility

Sunday, 03 Jun 2012 02:43 PM

 

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France's new Socialist government is determined to restore its credibility over budget management by meeting public deficit targets, Finance Minister Pierre Moscovici said on Sunday.

President Francois Hollande has pledged to stick to the previous conservative government's commitment to cut the deficit from an estimated 4.5 percent of gross domestic product in 2012 to within an EU-imposed limit 3.0 percent in 2013, even though many economists see that as hard without spending cuts.

"There is a lack of credibility for France about the public deficit," Moscovici said on LCI television. "We're being watched. I promise you Francois Hollande is fully aware of this, it's something he lives with every day."

The European Commission had warned on Wednesday that France risked missing its budget goals without fresh efforts.

"What's being asked of us is budgetary credibility. I tell you here again that (the public deficit) will be 4.5 percent in 2012 and 3.0 percent in 2013," Moscovici said.

Despite its bloated debt and deficit levels, France is borrowing at historically low rates. Europe's No. 2 economy has not balanced its budget since 1974.

He said Hollande would go ahead with a campaign promise to scrap a planned increase in the value-added sales tax rate, to be implemented under a law passed by former president Nicolas Sarkozy to finance a cut in companies' welfare contributions.

The government is also to present a decree at a cabinet meeting on Wednesday to partially roll back a 2010 pension reform and lower the age people can retire on a full pension back to 60 from 62, if they are deemed to have contributed long enough.

Moscovici said the government would present plans at the same cabinet meeting to set up a public investment bank to help finance small and mid-sized firms, another campaign promise.

© 2014 Thomson/Reuters. All rights reserved.

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