France lays out reforms to respect EU rules, boost growth

Wednesday 23 April 2014 12.24
French economy set to grow by 1% this year, rising to 1.7% next year and to 2.25% in 2016 and 2017
French economy set to grow by 1% this year, rising to 1.7% next year and to 2.25% in 2016 and 2017

France laid out a new economic programme to respect EU budget rules and curb public spending, while boosting growth and employment, in a keynote statement today.

The new government headed by Prime Minister Manuel Valls, which had wavered in its commitment to meet an already extended EU timetable, said it would cut overspending to 3% of output by the end of next year. 

This commitment was being closely monitored by EU authorities, and by France's partners in Europe.

It is also being closely watched on financial markets where there is concern that France has fallen badly behind in terms of reforms to raise competitiveness and reduce a huge trade deficit

The economy would grow by 1% this year, rising to 1.7% next year and to 2.25% in 2016 and 2017, the French government forecast in approving a financial stability programme.

France is in the grip of a struggle to pull away from a climate of stagnation, while introducing long-delayed reforms in the face of deep resistance to cutbacks in the scale of the state and steps to help businesses.

To achieve the deficit limit laid down by the European Commission, the government said it would get the deficit down to 3.8% of gross domestic product this year from 4.3% in 2013.

Under the raft of reforms in the pipeline or recently announced, but hotly contested by many supporters of the Socialist government, all public spending would amount to 56.7% of output this year, falling to 53.5% in 2017.

The debt relative to output would fall from 2016, and reforms would boost growth by half a percentage point from 2014 to 2017, the government forecast.

A so-called responsibility pact, already in the pipeline, but held up, based on cuts in taxes and social charges on business to be matched by cuts in public spending, would create 200,000 jobs by 2017, the government said.

Unemployment in France is running at record levels and was one factor behind humiliating defeats for the Socialists in recent local elections.