Sarkozy pins France on meetingeurozone deficit limits

8th July 2004, Comments 0 comments

PARIS, July 8 (AFP) - French Finance Minister Nicolas Sarkozy stressed on Thursday that France would respect its promises to reduce overspending in line with eurozone rules, and insisted that the country could not go on living on borrowed money.

PARIS, July 8 (AFP) - French Finance Minister Nicolas Sarkozy stressed on Thursday that France would respect its promises to reduce overspending in line with eurozone rules, and insisted that the country could not go on living on borrowed money.  

Sarkozy, addressing the French senate on budget policy, suggested that the French economy might grow by 2.3-2.4 percent this year instead of the officially forecast figure of 1.7 percent.  

But he also insisted that France must not use public spending or tax cuts to boost economic recovery because public finances were in too weak a state.  

In remarks which went beyond his written text which merely recalled France's commitments under the EU Stability and Growth Pact, Sarkozy declared:  

"In December 2003 France made commitments. This is France's word. We have to respect them."  

He listed the commitments as:  

- A return to a public deficit of less than 3.0 percent of gross domestic product from 2005;  

- Stabilisation of the volume of state spending or zero increase from 2004 to 2007;   - Reform of state health insurance;  

- The use of any surplus revenues from growth to reduce the deficit;  

- The financing of any further tax cuts either by increased control of spending or by the abolition of other taxes.  

"These commitments were taken at the highest level of the state. I intend to see that they are scrupulously respected," he said.  

As he spoke, official figures for spending on health insurance were published, showing that overall state health expenditure had totalled EUR 168 billion (USD 2.06.6 billion) last year, an increase of 0.4 percent from the 2002 figure and representing 10.8 percent of GDP.  

Saying that the economy might grow by "2.3 percent, perhaps 2.4 percent", this year, he warned the senate that "real international uncertainty" was weighing on growth.   He gave as examples "the price of oil which remains high, American (economic) imbalances, and the rate at which the US Federal Reserve's interest rates rise".  

Sarkozy also said that "falling back on new obligatory charges (levies) could not be considered" and that existing charges would be reduced "as soon as the budget situation permits".  

He said: "When the economy is slowing down, one immediately thinks of boosting it by expenditure of through easing taxes. These instruments, which may have proved their worth in the past, we must not use."  

He said: "Public finances are not in good condition. We can no longer live under the illusion that we can always go further and ward off the constraints: the reduction of the deficits and the debt is an absolute imperative, with figures and a timetable which are unavoidable."  

He also said: "We cannot continue to spend money which we do not have."  

His remarks about figures and a timetable refer to the constraints of the EU Stability and Growth Pact which requires countries, notably those in the eurozone, to contain their deficits within 3.0 percent of output.  

They are supposed to move towards a public surplus in times of growth so that they have room to run a stimulating deficit during downturns. France, is already in breach of the 3.0-percent ceiling.  

The pact also requires countries to contain their debt to 60 percent of output or, if they exceed this figure, to be reducing it structurally towards 60 percent. The French debt is tending to rise above this limit.

 

© AFP

 

Subject: French news

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