French Finance Minister Antoine Armand promised his euro area counterparts in Strasbourg on Monday 7 October that France would “fully respect its European commitments” even though the French public deficit will exceed 6.1% of national GDP in 2024.
“Our aim is to reduce the French deficit to 5% of GDP by 2025 and below the 3% threshold by 2029. This is a serious, credible and ambitious trajectory for our country in order to fully respect the European fiscal rules”, declared Mr Armand, echoing the announcements made by the Prime Minister, Michel Barnier (see EUROPE 13494/15). In his view, it will be possible for his country both to restore its public finances and to support growth and investment.
To reduce the public deficit from 6.1 to 5% of GDP in one year, the French government is planning a €60 billion effort. Two-thirds of this amount, around €40 billion, will come from savings and almost a third from tax increases, which will mainly target very large companies and the very wealthy.
At 112% of GDP in June, France’s public debt is now the third highest in the European Union after Greece and Italy.
The government will unveil its Finance Act on Thursday. Once it has been adopted by Parliament, it will be transmitted to the European level by the end of October, at the same time as the French multiannual budget programme.
On his arrival at the Eurogroup, the European Commissioner for Economic Affairs, Paolo Gentiloni, reported “promising” discussions underway at a technical level with the French authorities, without ignoring the “political difficulties” inherent in a government that does not have a majority in the national parliament.
The German minister, Christian Lindner, said he was “curious” to hear how France intended to put its public finances in order. Noting that several Member States had opted for “a period of seven years” to consolidate their public finances, the maximum period authorised by the revised Stability and Growth Pact, he encouraged his counterparts “to undertake structural reforms and to take decisions that are sometimes unpopular”. Mr Lindner added: “We must all be aware that the credibility of public finances in the eyes of the capital markets is no laughing matter”.
Asked about the implementation of the new European fiscal rules, the Spanish minister, Carlos Cuerpo, whose country will be presenting its budgetary trajectory and the reforms it will be undertaking on Tuesday 15 October, said that each government was learning as it applied these rules. “Everyone wants (the revised Pact) to get off to a good start” he said. (Original version in French by Mathieu Bion)