Sarkozy pledges deficit cut, sale of state assets

4th May 2004, Comments 0 comments

PARIS, May 4 (AFP) - French Finance Minister Nicolas Sarkozy, repackaging policy on Tuesday following election setbacks, stood by promises to respect eurozone deficit rules, but tempered reference to reform with measures to boost demand.

PARIS, May 4 (AFP) - French Finance Minister Nicolas Sarkozy, repackaging policy on Tuesday following election setbacks, stood by promises to respect eurozone deficit rules, but tempered reference to reform with measures to boost demand.

Insisting that he would fight on all fronts to tackle low growth and high deficits, Sarkozy signalled that the economy would grow by 1.7 percent this year from a 10-year low growth figure of 0.5 percent last year.

To help public finances, the government would arrange the sale of some central bank gold, sell property and stakes in some companies.

Attacking the previous Socialist government's 35-hour work week as "against economic logic", he said he had asked former IMF chief Michel Camdessus to report on why France lagged in international growth stakes.

"When you think that world growth is 4.6 percent and that we've been promised growth of 1.7 percent (in France), it is urgent to try to understand what's holding growth back," he said.

Training his sights on the 35-hour week, he said: "France is the only country in the world which has done this successfully: weakening the value of work and stifling both supply and demand without even talking about the colossal cost of this reform on the public finances."

And, only a week after controversy over French government lobbying to bring about a merger between French drugs groups Sanofi-Synthelabo and Aventis, he spoke of the state's duty to help French companies become global forces, saying he was against a breaking-up of ailing engineering giant Alstom.

Sarkozy also outlined a campaign to discourage companies from moving industrial activities abroad.

He was appointed economy, finance and industry supremo after a recent rout for the right-wing government in regional elections ascribed to voter hostility to a policy emphasis on structural reform, and alarm at headlines about high unemployment and industrial relocation abroad.

But the government, elected on promises to slash taxes, is in serious breach of eurozone overspending rules. Sarkozy declared: "We must ... respect in 2005 the commitment of a public deficit of less than three percent of GDP."

France's public-sector deficit amounted to 4.1 percent of gross domestic product in 2003, well in excess of eurozone rules calling for a deficit no greater than three percent, but which have been repeatedly broken by France and Germany.

Although he gave support to the eurozone deficit rules, which are laid out in the 1997 Stability and Growth Pact, he said they should be interpreted more flexibly.

With the deficit expected to stand at 3.6 percent of GDP in 2004, the government would aim to bring it down in 2005 to 2.9 percent.

Sarkozy, who is known to have presidential ambitions, reaffirmed that the government would stick to a spending freeze for 2004.

On reform, he said that the government would push ahead with structural changes to curtail huge health and welfare deficits, and to reduce the number of civil servants.

After getting the Bank of France's approval, 500 to 600 tonnes of gold held by the French central bank would be sold. The bank would hold the proceeds but the interest from the money raised would go to the state.

The state would also sell 30 to 40 percent of the SNECMA airplane engine-maker by the end of June generating EUR 1.6 billion to EUR 2.2 billion and would sell stakes in highway operators SANEF and SAPRR by the end of the year.

Sarkozy said the proceeds from the operations would not be used for the state's current needs but to bring down the debt.

In order to boost growth by getting the French to spend more, he announced a series of tax incentives especially on consumer credit.

However, he also said that tax breaks currently in place would be looked at over the course of this year and any tax breaks judged to be unfair or ineffective would be removed or reformed, with any subsequent increase in state income diverted to tax cuts for all.

Action would be taken to discourage companies from leaving France for countries with lower costs by giveing aid to firms that agreed not to relocate.

© AFP

Subject: French news

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