France lowered its growth forecast again on Wednesday and warned it will need more time to bring its public deficit in line with European Union rules, as the eurozone's second-largest economy remains stuck in stagnation and low inflation.
French Finance Minister Michel Sapin told reporters the French economy would grow by just 0.4% in 2014, compared with the 0.5% growth forecast issued just a few weeks ago. In 2015, France's economy will grow by 1%, versus the previous forecast of 1.7%, Mr. Sapin said.
He conceded that France's public deficit would stand at 4.4% of economic output in 2014, instead of falling to 3.8%. A raft of spending cuts in 2015 should help the government reduce the public deficit to 4.3% next year, and below 3% in 2017, he said.
The comments mark another pushback on France's deficit targets, the latest acknowledgment from the French government of its grave economic challenges.
Under President François Hollande's supervision, France has already negotiated a two-year delay to 2015 from 2013 to get the budget deficit within the EU rule of 3% of gross domestic product. Mr. Sapin's comments suggest it will seek to get authorization for a further delay.
"We are not asking for any change in European rules, we are not asking for any suspension, or for any exception to be made for France or any country," said Mr. Sapin. "We are asking for everyone to take into account the economic reality, growth that is too weak and inflation that is too low."
Mr. Hollande's government is struggling to find ways to boost the economy, which failed to register any growth throughout the first half of the year. It has pledged a raft of measures to revive the construction sector and is considering loosening rules governing openings of stores on Sunday. The government is also trying to push ahead with territorial reform and other measures to restrict monopolies on sectors such as the pharmaceutical industry.
But economists are skeptical that the policies will be enough. Mr. Hollande, halfway through his presidential mandate, has failed to deliver on his key campaign pledge to arrest the rise of unemployment in France. High taxes and uncertainty over government policies have weighed on corporate investment.
The government has sought to adopt a more pro-business image, but Mr. Hollande's responsibility pact with companies—announced with much fanfare in January—has failed to deliver tangible results.
Mr. Sapin said the government wouldn't raise taxes further but would seek to address its fiscal challenges by continuing to cut spending. "We need to find the right pace to reduce the deficit while preserving growth," he said.
Mr. Sapin said that the government would stick to its promise to cut €50 billion ($65 billion) from France's big public spending bill over the next three years. Despite signals last week by the government that it may ease planned cost-cutting measures, France will stick to its target of €21 billion in spending cuts in 2015, said Mr. Sapin.
The plans to cut spending are likely to continue to generate discord among the leftist fringes of Mr. Hollande's Socialist Party.
After a drubbing at the polls in local elections in March, Mr. Hollande shuffled his government, appointing Manuel Valls prime minister and handing him the responsibility for marshaling the new pro-business platform.
But as the economy stagnated, opponents grew in strength. Around 40 Socialist lawmakers abstained from voting on a program of public spending cuts to fund the business tax cuts in the coming years. Late last month, the French president again shuffled his cabinet, casting aside ministers who had accused Mr. Hollande of inflicting damaging austerity on the French economy.
Dissident lawmakers will have another opportunity to show their resolve on Sep 16, when Mr. Valls faces a confidence vote in Parliament. The government is set to detail its budget for 2015 on Oct. 1.Source:http://online.wsj.com/
French Finance Minister Michel Sapin told reporters the French economy would grow by just 0.4% in 2014, compared with the 0.5% growth forecast issued just a few weeks ago. In 2015, France's economy will grow by 1%, versus the previous forecast of 1.7%, Mr. Sapin said.
He conceded that France's public deficit would stand at 4.4% of economic output in 2014, instead of falling to 3.8%. A raft of spending cuts in 2015 should help the government reduce the public deficit to 4.3% next year, and below 3% in 2017, he said.
The comments mark another pushback on France's deficit targets, the latest acknowledgment from the French government of its grave economic challenges.
Under President François Hollande's supervision, France has already negotiated a two-year delay to 2015 from 2013 to get the budget deficit within the EU rule of 3% of gross domestic product. Mr. Sapin's comments suggest it will seek to get authorization for a further delay.
"We are not asking for any change in European rules, we are not asking for any suspension, or for any exception to be made for France or any country," said Mr. Sapin. "We are asking for everyone to take into account the economic reality, growth that is too weak and inflation that is too low."
Mr. Hollande's government is struggling to find ways to boost the economy, which failed to register any growth throughout the first half of the year. It has pledged a raft of measures to revive the construction sector and is considering loosening rules governing openings of stores on Sunday. The government is also trying to push ahead with territorial reform and other measures to restrict monopolies on sectors such as the pharmaceutical industry.
But economists are skeptical that the policies will be enough. Mr. Hollande, halfway through his presidential mandate, has failed to deliver on his key campaign pledge to arrest the rise of unemployment in France. High taxes and uncertainty over government policies have weighed on corporate investment.
The government has sought to adopt a more pro-business image, but Mr. Hollande's responsibility pact with companies—announced with much fanfare in January—has failed to deliver tangible results.
Mr. Sapin said the government wouldn't raise taxes further but would seek to address its fiscal challenges by continuing to cut spending. "We need to find the right pace to reduce the deficit while preserving growth," he said.
Mr. Sapin said that the government would stick to its promise to cut €50 billion ($65 billion) from France's big public spending bill over the next three years. Despite signals last week by the government that it may ease planned cost-cutting measures, France will stick to its target of €21 billion in spending cuts in 2015, said Mr. Sapin.
The plans to cut spending are likely to continue to generate discord among the leftist fringes of Mr. Hollande's Socialist Party.
After a drubbing at the polls in local elections in March, Mr. Hollande shuffled his government, appointing Manuel Valls prime minister and handing him the responsibility for marshaling the new pro-business platform.
But as the economy stagnated, opponents grew in strength. Around 40 Socialist lawmakers abstained from voting on a program of public spending cuts to fund the business tax cuts in the coming years. Late last month, the French president again shuffled his cabinet, casting aside ministers who had accused Mr. Hollande of inflicting damaging austerity on the French economy.
Dissident lawmakers will have another opportunity to show their resolve on Sep 16, when Mr. Valls faces a confidence vote in Parliament. The government is set to detail its budget for 2015 on Oct. 1.Source:http://online.wsj.com/
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