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Can France's budget reduce record debt

Wednesday, September 25, 2013 - 01:51

Sept 25 - The French 2014 budget is designed to reassure voters concerned about a struggling economy. But the bulk of the savings are being made through curbs in spending rather than tax increases. Ciara Sutton asks how that's viewed by investors.

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It's on a firm footing when it comes to fashion but France's finances aren't quite so stable. As Paris Fashion week got underway the government unveiled a budget to tackle that. It's focussing on spending cuts to stimulate the economy - although there will be tax hikes for households. There will be less tax for French businesses though in a plan to make them more competitive. Finance minister Pierre Moscovici. (SOUNDBITE) (French) FRENCH FINANCE MINISTER PIERRE MOSCOVICI SAYING: "Our financial bill is a budget to boost employment, because this is the ultimate goal of our economic policy. This is the President of the Republic's top priority." The aim - to save 15 billion euros. But it's not going to be easy. 2013 has hardly seen any growth and next year's forecast is not much better at less than 1%. France's public debt is also set to hit a record high - at over 95% of GDP. Mike Ingram is from BGC. (SOUNDBITE) BGC'S MIKE INGRAM, SAYING: "France is very much a concern. In many quarters it's considered the new sick man of Europe. The French government or the public sector in France is massively bloated and the Hollande government over the past few years has shown no real willingness to reign back significantly. So we have this budgetary package but the question is can the government actually deliver on this?" Economists are split on the advantages of cutting spending while the recovery is still weak. And EU officials are also quietly expressing their disappointment, particularly with the modest nature of France's pension reforms. The European Commission is giving France more time to reduce its deficit. But the re-election of an austerity-hungry German Chancellor may increase pressure on the government.

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Can France's budget reduce record debt

Wednesday, September 25, 2013 - 01:51