PARIS Dec 18 France must cut spending to meet
its budget deficit target and undertake structural reforms to
boost competitiveness, European Central Bank Executive Board
Member Peter Praet said on Tuesday.
President Francois Hollande has pledged to slash the public
deficit to 3 percent of economic output next year from an
estimated 4.5 percent this year, but has so far shied away from
deep-reaching spending cuts many economists say are necessary.
In an interview with French daily Le Figaro, Praet said the
government's deficit-cutting plans relied too much on tax rises,
and that over the long term it was vital to implement reform.
"France has too often resisted change," Praet said.
"There is a consensus now in France on the need to improve
public finances and competitiveness. To do that, structural
reform is needed."
France's Socialist government launched a public spending
review on Tuesday, but stopped short of outlining budget cuts,
focusing instead on streamlining administrative procedures in
order to find savings.
At 57 percent of GDP, France's public spending is among the
highest in the developed world, and Praet said deeper measures
were needed to change the structure of outlays to keep finances
Last month's decision to cut labour costs by introducing tax
rebates for companies was a step in the right direction, he
said, but the move was financed by tax rises such as a hike in
VAT which would ultimately limit its impact.
Moody's rating agency last month stripped France of its
triple-A credit rank, warning it would downgrade the country's
debt further if the government failed to implement reforms such
as a labour market overhaul.
The agency said the growth forecasts built into the
government's medium-term budget plan were overly optimistic, and
changes need to be made to rigid labour laws and to goods and
services markets to make the country more competitive.
France's growth forecast of 0.8 percent for next year has
been questioned by economists, given that the broader euro zone
economy has slipped into recession.
Praet said that despite the economic downturn, France and
other countries in the bloc should not back away from meeting a
3 percent deficit target.