France slashes spending in 2015 budget but pleads for EU deficit mercy

The French government is to continue cutting public spending but will ask Europe for a third extension of its deadline on the reduction of its deficit, according to the 2015 budget announced on Wednesday. A key finance committee immediately declared the government’s growth forecasts optimistic.

French Finance Minister Michel Sapin (C) and Budget Minister Christian Eckert (L) present their 2015 budget Reuters/Jacky Naegelen

The budget confirms the government’s plan to make cuts of 21 billion euros next year and 50 billion euros over three years, while easing the tax burden on nine billion taxpayers to the tune of 3.2 billion euros.

“France has never made an effort on such a scale,” Finance Minister Michel Sapin commented.

But the cuts will not mean allow France to achieve its promise to the European Union to reduce the budget deficit to 3.0 per cent of gross domestic product (GDP) next year.

The budget predicts that the deficit will be 4.4 per cent this year, 4.3 per cent next year and 3.8 per cent in 2016, finally reaching 2.8 per cent in 2017, meaning that Paris must ask Brussels for the third time for an extension of the deadline.

France has “faced up to its responsibilities”, Sapin said, blaming the failure to meet the target on the long-drawn-out economic crisis, “Europe must now face up to its responsibilities in all respects”.

The budget is based on growth forecasts of one per cent in 2015, rising to 1.9 per cent in 2017 and expects inflation to return at a rate of 0.9 per cent, excluding tobacco products.

No sooner was the budget made public than the independent public finance committee declared those timid predictions “optimistic”, thus casting doubt on deficit target even in its revised form.

The spending cuts, which the government insists do not mean “austerity”, will come from 9.6 billion euros of cuts to family allowances, already announced to widespread criticism by Social Affairs Minister Marisol Touraine, a 3.7-billion-euro reduction in central grants to local authorities and a one-billion-euro reduction in central government spending.

Given that central government spending was previously planned to increase six billion euros, that means a reduction of more than seven billion euros, as Sapin pointed out to Le Monde newspaper, adding that 1.4 billion euros will be slashed from the state’s wage bill.

Hard-left politician Jean-Luc Mélenchon was one of the first to react on Wednesday morning.

“This economic policy has never worked in any country and will never work,” he told France Info radio.

“The spending cuts will actually affect household budgets more than the tax cut, which the government would like to be seen as a major measure,” comments Antoine Bozio, the director of Institute of Public Policies at the Paris School of Economics.

The cuts will be unpopular, Bozio told RFI, but some might be beneficial in the long term

“When you receive a benefit and the government announces that it will be reduced, you’re bound to be upset. But in the end, the question is whether these types of cuts actually improve the overall efficiency of the government’s tax and spend.

“We know the overall areas where the cuts will be, in social spending, social security, the French state. But we don’t know all the details yet, and that will be in the next few weeks. I think it’s in the details of these cuts that we’ll be able to assess whether the government is actually making steps towards balancing the budget with improved efficiency.”