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France/deficit reduction

Published on July 19, 2010
Interview given by François Baroin, Minister for the Budget, Public Accounts and Administrative Reform, to the “Les Echos” newspaper (excerpts)

Paris, July 6, 2010

Q. – This afternoon in the National Assembly you’re opening the debate on the preparation of the 2011 budget. What message do you want to get through to the deputies?

THE MINISTER – It’s extremely clear and simple: the need to reduce the public deficit from 8% of GDP this year to 6% next year. It’s a sacrosanct, absolutely stringent objective and we’ll give ourselves all necessary means to achieve it. I make no secret of how tough it is: France has never made such a huge effort, including [when she had to] “qualify” for the euro in the mid-1990s. All the expenditure savings already decided and all the tax measures which we’ll decide on at the end of the summer are geared to this objective. But the most important one is the pension reform. Without reform, it is totally unrealistic to think that we’ll be able to restore our public finances to a sound footing. This means cutting the structural deficit by 1.2% percentage points and debt by 10 percentage points. A huge challenge.

Q. – How are the efforts going to be shared out?

THE MINISTER – Between 2010 and 2011 we’ll have to find €40 billion. Firstly, €15 billion from the non-renewal of the stimulus plan measures. Secondly, the post-crisis pick-up in tax receipts should bring in €11 billion. Is this credible? Yes: last year, revenue from corporation tax was down by 60% and that from capital transfer tax (which depends on the property market) 30%; there’s no reason for this to go on. Finally, thirdly: €14 billion from savings in every area of public activity. (…)

Q. – How does the French plan compare with what the Germans and British are doing?

THE MINISTER – François Fillon has announced a plan for cuts of €100 billion over three years and the Germans one for cuts of 80 billion over four years. We will have reduced the number of civil servants by 200,000 over six years, they will have reduced theirs by 15,000… the freezing of basic pay in the public sector for next year is clear and an extremely concrete measure! The criticism at times levelled at France doesn’t hold up. The Germans are more audible because they have always been considered efficient when it comes to public finances. We are going to ensure that in the future France is as well. The constitutional revision under preparation should help us.

FRANCE/EU

Q. – France’s contribution to the European Union is going to increase to finance, inter alia, the 6% pay rise for European officials. Do you agree with this decision?

THE MINISTER – It’s unacceptable. Brussels must quickly make proposals for a downward review of this budget. (…)./.

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