French budget balancing law clears hurdle but likely to fail

13th July 2011, Comments 0 comments

A move by French President Nicolas Sarkozy to change the constitution to oblige governments to run balanced budgets passed parliament Wednesday but remains on course to be blocked by the opposition.

The so-called "Golden Rule" would force future administrations to draw up spending plans explaining how they could repay public debt within three years.

Sarkozy's centre-right ruling majority backs the plan, which it believes would help restore confidence in government debt at a time when the eurozone is wracked by the worst crisis in its history.

But the opposition Socialists argue that it is unrealistic to expect future governments to able to always balance budgets, while any law would bind their hands too tightly and prevent them from addressing social crises.

To change the constitution, Sarkozy needs to summon the Senate upper house and the National Assembly to meet in joint session and win a three-fifths majority in a vote, which he could not do without cross-party support.

Sarkozy's proposed law would bring the French constitution in line with that of Germany, which is often cited as an economic model by the French leader, despite Paris' long-standing large budget deficit.

France's public debt rose to 1.65 trillion euros ($2.32 trillion) or 84.5 percent of gross domestic product in the first quarter, far above the EU 60 percent limit but still less than in some other member countries.

Europe has been forced to step in to bail out Greece after it looked likely to default, and ratings agencies have downgraded Irish and Portuguese government debt to junk status, threatening the stability of the single currency.

© 2011 AFP

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