Budget minister sees "pause" in deficit cutting

23rd May 2007, Comments 0 comments

PARIS, May 23, 2007 (AFP) - The new French Budget Minister Eric Woerth said on Wednesday he favoured a "pause" in cutting back the budget deficit so as to make room for extra spending on investment.

PARIS, May 23, 2007 (AFP) - The new French Budget Minister Eric Woerth said on Wednesday he favoured a "pause" in cutting back the budget deficit so as to make room for extra spending on investment.

His comment was the latest in a series of signals from senior government figures that cutting the deficit further is not an immediate priority for the new administration.

Separately, Prime Minister Francois Fillon told Europe 1 radio that tax measures planned by his new government would be aimed at giving a "shock" to the economy.

He said the aim was to achieve annual growth of 3.0 percent instead of the expected figure of 2.0-2.5 percent.

Woerth, speaking on BFM radio said, in reference to the deficit: "Yes, a pause if this pause is useful and if this pause is efficient.

"Accepting deficits to finance investment: we are totally in this frame of mind."

But he also said: "We should be able to respect, I hope, the targets for the deficit and the debt for 2007. In any case we are going to work to achieve this in the next few weeks."

He added: "The debt will not rise this year."

Right-winger Nicolas Sarkozy, in the run-up to his election as French president, made it clear the overall results of the five-year presidential term rather than immediately cutting the deficit would be what counted.

"That we have ... to invest in research and that this can lead momentarily to stabilising of the deficit: what does it matter? For too long we have sacrificed spending on research to the logic of the accounts."

Woerth said on Wednesday that most of the government's tax measures "will take effect over time, during the year, and will not produce in the full year what they will produce in 2008."

France reduced its state overspending, known as the public deficit, to within the 3.0 percent limit set by EU and eurozone rules in 2005. But the debt of accumulated past deficits exceeds the permitted ceiling of 60.0 percent of output.

The rules are intended to lead countries to build up budget surpluses in times of growth. The public deficit -- or surplus, as the case may be -- covers spending by central government, social security administrations and local authorities.

The last centre-right government made reduction of the deficit and debt a priority in its last two years in office. The leading candidates in the recent presidential election campaign all expressed concern about the debt.

But the two second-round candidates, Sarkozy and the socialist candidate Segolene Royal, were vague about how they could increase investment, in research for example, while at the same time cutting back on spending. Their programmes both relied largely on growth, and on reducing waste.

Immediately after Sarkozy's election, the European Union Commissioner for Economic and Monetary Affairs Joaquin Almunia urged France to respect its obligation to reduce the public deficit.

He said that this, and reduction of the debt, was a challenge for France and called on the new government to show that this remained the objective.

But last week Fillon said: "It is over five years that we will reduce the deficit of the state budget, it's over five years that we will reduce the debt."

He added: "Sometimes it is necessary to know when to invest a little so as to make big economies later." He also stressed the importance of "boosting growth."


Copyright AFP

SUbject: French news

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