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France to slow deficit cuts but respect 2015 target: minister
April 17, 2014 / 6:22 AM / 4 years ago

France to slow deficit cuts but respect 2015 target: minister

PARIS (Reuters) - France has won backing from European partners to slightly slow the reduction of its public deficit but will still respect its EU-imposed deficit target in 2015, French Finance Minister Michel Sapin said on Thursday.

France's Finance Minister Michel Sapin makes remarks during a press briefing during the IMF and World Bank 2014 Annual Spring Meetings in Washington, April 12, 2014. REUTERS/Mike Theiler

France must bring the deficit in line with an EU limit of 3 percent of national income next year, a target most economists consider out of reach after the deficit came in at 4.3 percent last year, missing its target of 4.1 percent.

Sapin said he had not sought backing from Brussels for extra time to cut the deficit, but rather had discussed and “partly” won support for changing the speed of deficit reduction.

“The pace is modified. It’s been discussed with our European partners so that it’s well understood,” Sapin said on RTL radio.

“We have a slightly slower-than-planned pace of deficit reduction, but obviously we will respect all our commitments.”

Asked to elaborate on Sapin’s comments, a Finance Ministry official said the 3 percent target for 2015 held but declined to comment on whether that meant this year’s 3.6 percent target would change.

Sapin’s comments received a cool response in Brussels.

While declining to comment directly, a spokesman for the European Commission referred to recent remarks by Commissioner Siim Kallas throwing cold water on the idea of granting France further flexibility.

Shortly after meeting Sapin last week in Washington, Kallas, who has temporarily taken charge of economic affairs at the Commission, said that France should stick to its commitments to avoid damaging the credibility of the euro zone and that there was little appetite to grant it “additional room”.

SAVINGS DRIVE

Lingering questions over France’s capacity to cut its deficit are having little impact on its financing costs. It saw strong investor demand when it sold 9.4 billion euros of fixed and inflation-linked bonds.

A group of nearly 100 mostly Socialist lawmakers wrote to Prime Minister Manuel Valls hinting they may not support his plans for a new round of belt-tightening in parliament if he does not soften them.

Hollande’s Socialists have a slim majority in parliament.

“It’s the return of growth that will determine whether the deficit falls to less than 3 percent,” they wrote. “Therefore, the target of less than 3 percent can only be met if it is pushed back.”

Valls announced some details of 50 billion euros worth of savings over three years on Wednesday. They include plans to freeze some pensions and other benefits and extending caps on public-sector pay increases.

The full plan will go to the cabinet on Wednesday before a parliamentary vote on Friday. It will then be formally submitted to Brussels.

Sapin and other French officials have said they have never wavered over the budget targets, rejecting media reports they tried earlier this month to lay the ground for renegotiation but were slapped down by Brussels.

France has already received two extra years to meet the 3 percent target, and the European Commission and Berlin have little stomach for granting more time.

Although many members of Hollande’s own Socialists are uneasy with the new wave of belt-tightening, party chief Jean-Christophe Cambadelis was confident the plan would win backing in parliament.

“Debate is always possible, but solidarity with the government cannot be put into question,” Cambadelis said on Europe 1 radio.

($1 = 0.7243 Euros)

Reporting by Leigh Thomas; Additional reporting by John O'Donnell in Brussels; Editing by Mark John and Tom Heneghan

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