Brussels, 17/04/2014 (Agence Europe) - On Wednesday 16 April, the French government unveiled pubic spending savings to help the country meet its public deficit target of 3% of GDP in 2015.
The savings will total €50 billion over three years and will come from welfare spending (€21 billion), the costs of running the state (€18 bn) and local authorities (€11 bn).
In an unprecedented move, welfare benefits such as pensions in the public and private sector, family allowances and housing benefit will be frozen until October 2015 or later in order to save an expected €2 bn. In addition to the measures taken by the previous government, unemployment insurance and extra pensions will each have to find savings of €2 bn, and health insurance savings of €10 bn (not including refunds). The cost of managing social security will have to cut by €1.2 bn. The French government has postponed until 2015 the increase in income support (revenu minimum d'insertion - RSA), but is retaining the minimum social payments (RSA, old age).
For spending on the civil service, the current freeze in pay rises for officials will continue until 2017. The civil service will be slimmed back, apart from official working in universities and job search bodies. The creation of jobs in the country's education service will continue. At local level, along with the reduction in payments from the central state, a rationalisation of the network of local communities is under study, the idea being to merge a number of regions.
It had been feared that after its resounding defeat in the local elections, the socialist government might not meet the budget commitments under the Stability and Growth Pact, but in unveiling this package of reform, it is reassuring its European partners and the European Commission of its firm intentions. In June, the Commission will publish recommendations on the French stability and reform programmes.
The French government believes in a give-and-take approach, and in return is calling for a change of policy at EU level. In business newspaper Les Echos on Thursday 17 April, the French economy minister, Arnaud Montebourg, said the government was undertaking reforms and in exchange it had things to ask of Brussels, such as measures on the reduction of deficits and for Europe to change tack both on monetary policy and in terms of economic stimulus through investment. He called for a meeting in the near future at EU level to deal with the fact that the euro is too high, urging the head of the ECB, Mario Draghi, to take action in early May as part of the ECB's job to keep inflation at just under 2% (see EUROPE 11060). (MB)