France changes speed of deficit reduction but maintains EU target

The new French government will adjust its approach and the speed of its programme to reduce burgeoning public deficits but will not back away from European Union benchmarks set out for all EU member countries, Finance Minister Michel Sapin said on Thursday. Sapin has been charged with renegotiating the speed of the deficit reduction plan which obliges France to reduce public spending and cut the overall public deficit to 3.0 percent of Gross Domestic Product (GDP) by 2015. Last month, it was announced that France had failed to reduce the deficit to 4.1 percent of GDP in line with projections and, instead, had a 4.3 percent of GDP public deficit in 2013. The government is also committed to a 3,6 percent deficit in 2014 yet it is unclear if this target can be met. But as newly-appointed Prime Minister Manuel Valls indicated earlier this week, the government intends to cut Euros 50 billion (USD 69 billion) from government spending in the next two years. Cuts will be made in public health and benefits and allowances and there will be a civil service pay freeze, but no new taxes will be raised on small- and medium-size companies and lowest paid workers will get a small boost to revenues. Sapin said that the French proposal to adjust the speed of deficit reduction had gotten partial support from the European Commission in Brussels, which has already given Paris an extra two years to get into line. The Finance Minister said France's position was "well understood" and has been "discussed" with EU authorities, although no firm agreement had been reached. France will still maintain the EU deficit targets, he said. "We have a slightly slower-than-intended deficit reduction speed, but we will obviously respect all commitments," Sapin told "RTL" radio.