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As France struggles to balance its books, François Hollande dreams on As France struggles to balance its books, François Hollande dreams on
(3 months later)
It used to be a parliamentary tradition. Before the long summer break that the French are accustomed to, the government would report on the evolution of the ongoing budget – tax receipts on one side, public spending on the other. Of course the figures would never match the original estimates. With the noble exception of Raymond Barre, who actually did balance the budget in the early 1970s, the French public deficit has been merrily and steadily escalating, under conservative governments as much as under socialist ones. It now amounts to 56.6% of GDP, the highest of all OECD countries except Denmark.It used to be a parliamentary tradition. Before the long summer break that the French are accustomed to, the government would report on the evolution of the ongoing budget – tax receipts on one side, public spending on the other. Of course the figures would never match the original estimates. With the noble exception of Raymond Barre, who actually did balance the budget in the early 1970s, the French public deficit has been merrily and steadily escalating, under conservative governments as much as under socialist ones. It now amounts to 56.6% of GDP, the highest of all OECD countries except Denmark.
This time around, the government has refused to present to parliament the "collectif budgétaire" – an emergency mid-year budget to tackle the shortfall in tax receipts. It has a good excuse: the 2013 budget had been set up under the 3% deficit target that President Hollande had promised to abide by before obtaining a two-year extension. In the meantime, recession has settled in, erasing the low growth rate the ministry of finance had been counting on.This time around, the government has refused to present to parliament the "collectif budgétaire" – an emergency mid-year budget to tackle the shortfall in tax receipts. It has a good excuse: the 2013 budget had been set up under the 3% deficit target that President Hollande had promised to abide by before obtaining a two-year extension. In the meantime, recession has settled in, erasing the low growth rate the ministry of finance had been counting on.
Last week, the opposition trumpeted a shocking figure: this year's deficit would reach €80bn instead of the €61bn authorised by parliament. Commentators had already written it off as another blunder in the government's catalogue of errors before realising that different criteria had been used. The opposition had stuck to the 3% deficit rule instead of adjusting its figures to the 3.7 % authorised by the European commission until 2015.Last week, the opposition trumpeted a shocking figure: this year's deficit would reach €80bn instead of the €61bn authorised by parliament. Commentators had already written it off as another blunder in the government's catalogue of errors before realising that different criteria had been used. The opposition had stuck to the 3% deficit rule instead of adjusting its figures to the 3.7 % authorised by the European commission until 2015.
Last Thursday, the French court of auditors officially warned the deficit target would not be met: it would reach 3.8 – 4.1% this year, assuming a 0.1% economic growth rate. The court recommended that €28bn be saved over the 2014-2015 period, listing a series of recommendations that reads like a socialist government's nightmare. Not only will structural reforms have to be more forcefully driven through, but more than two-thirds of the savings have to come from cuts in public spending.Last Thursday, the French court of auditors officially warned the deficit target would not be met: it would reach 3.8 – 4.1% this year, assuming a 0.1% economic growth rate. The court recommended that €28bn be saved over the 2014-2015 period, listing a series of recommendations that reads like a socialist government's nightmare. Not only will structural reforms have to be more forcefully driven through, but more than two-thirds of the savings have to come from cuts in public spending.
First and foremost, social welfare programmes covering pensions, health and unemployment benefits have to be curtailed; 10,000 civil service jobs need to be cut; the education department, with its huge workforce which happens to be the pillar of the socialist electorate, has to be trimmed down.First and foremost, social welfare programmes covering pensions, health and unemployment benefits have to be curtailed; 10,000 civil service jobs need to be cut; the education department, with its huge workforce which happens to be the pillar of the socialist electorate, has to be trimmed down.
The prime minister's office published a perfunctory statement about the court's "extremely pessimistic hypothesis", but immediately issued an outline of what the 2014 budget would be: €14bn is to be saved. This time, specific areas of public spending are targeted. Several government departments will endure cuts: 7% less for the environment, 5.4% less for agriculture, 2.8% for culture. Publicly funded agencies– from Météo-France to CNRS, the scientific research centre – will be hit. The budget outline, which the national assembly is due to examine today, is the most austerity driven in modern French history.The prime minister's office published a perfunctory statement about the court's "extremely pessimistic hypothesis", but immediately issued an outline of what the 2014 budget would be: €14bn is to be saved. This time, specific areas of public spending are targeted. Several government departments will endure cuts: 7% less for the environment, 5.4% less for agriculture, 2.8% for culture. Publicly funded agencies– from Météo-France to CNRS, the scientific research centre – will be hit. The budget outline, which the national assembly is due to examine today, is the most austerity driven in modern French history.
What remains to be seen is how this plays out politically. After the rather pathetic verbal jousting between François Hollande, his volatile minister Arnaud Montebourg and the European commission president José Manuel Barroso, the French president will have to explain what his policies are going to be in such extreme economic circumstances. True to his escapist self, he has already promised that civil servants would not be used as "an adjustment factor". The verbal balancing act goes on. But the figures will stick.What remains to be seen is how this plays out politically. After the rather pathetic verbal jousting between François Hollande, his volatile minister Arnaud Montebourg and the European commission president José Manuel Barroso, the French president will have to explain what his policies are going to be in such extreme economic circumstances. True to his escapist self, he has already promised that civil servants would not be used as "an adjustment factor". The verbal balancing act goes on. But the figures will stick.
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