Porto, 14/09/2007 (Agence Europe) - Meeting in Portugal for an informal meeting, eurozone finance ministers were briefed by France on the main drift of its revised Stability Programme announced in July this year by President Nicolas Sarkozy (see EUROPE 9465). While they encourage the structural reforms announced in the French plan to breathe new life into growth in the flagging economy, they are very firm about the need for France to reduce its public deficits at the same time, in line with the commitments made by ministers at the informal meeting in Berlin (see EUROPE 9411). Despite reassurances to the contrary, the French authorities seem to have given hope of meeting these commitments since they are envisaging moving away from the target of cutting deficits by 0.5% a year and do not forecast returning to budget equilibrium in 2010 as expected but rather two years later. Ministers will be returning to France's revised Stability Programme at October's ECOFIN Council. Looking at the economic situation in general, Eurogroup is confident about its growth forecasts for the eurozone despite recent slight reductions due to the current turmoil on the money markets. Special talks on the credit crunch will start on Friday afternoon with all the EU27's finance ministers and continue on until Saturday morning.
After the meeting, Jean-Claude Juncker, Eurogroup President, said Christine Lagarde had explained the ins and outs of the French structural reform plans in what he said was an impressive number of areas. He said he believed the structural reforms went in the right direction to boost France's growth potential. Nevertheless, ministers in the eurozone are not very happy with the budget situation in France. Luxembourg's prime minister, Jean-Claude Juncker, said he thought the ambitions France had demonstrated did not totally live up to Eurogroup's expectations. He repeated the commitments made by Eurogroup in Berlin in April, namely that member states had to take advantage of economic booms to cut their public deficits by 0.5% a year to reach budget equilibrium by 2010 at the latest. He was very insistent that structural reforms had to go hand in hand with budget consolidation. The same words were used by Joaquin Almunia, who said he was counting on peer group pressure and promised to closely monitor the situation in France. The EU Economic and Monetary Affairs Commissioner commented on the public deficit forecasts for 2007 in the French revised Stability Programme, revised to 2.4%, that it was still possible to meet the target but there were real dangers.
French finance minister Christine Lagarde said France was doing well but a little more was needed. She stressed the very strong backing from member states, the European Commission and the President of Eurogroup for the French government's planned structural reforms. The reforms will be introduced (or have already been introduced) in areas like competition and special pension regimes. She said that not all member states were happy with France's deficit for 2007 or the objective for 2008 (2.3% next year, in other words a 0.1% reduction on 2007), but said they had taken note of the huge efforts being made by France. She promised that the government would do all it could to meet its Berlin commitments as soon as the economic situation allows. As proof of this, Lagarde told her eurozone colleagues of France's pledge to use supplementary tax income and all monies raised by privatisation to correct the public finance situation. Asked about France's highly optimistic growth forecasts (2.5% in 2009 and 3% in 2010), Lagarde said the 3% scenario was very positive but was not the only scenario she was working on. On Tuesday, the European Commission revised down its annual growth forecasts for France from 2.4% last May to 1.9%, the sharpest fall in forecasts of any of the seven biggest European economies (see EUROPE 9499). (mb)