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France/public deficit

France/public deficit

Published on August 20, 2010
Communiqué issued by the Presidency of the Republic

Bormes les Mimosas, August 20, 2010

President Sarkozy had a meeting today at Fort de Brégançon (Var) with M. François Fillon, Prime Minister, Mme Christine Lagarde, Minister for the Economy, Industry and Employment, and M. François Baroin, Minister for the Budget, Public Accounts and Administrative Reform.

The President said that reducing the public deficit to 6% of GDP in 2011, irrespective of the rate of growth, was a major objective for the country.

After a 0.2% rise in GDP in the first quarter, 0.6% growth had been recorded in the second quarter. This growth was accompanied by a revival of salaried employment, with the creation of 35,000 jobs on top of the 23,900 jobs created in the first quarter. Given this rebound in activity, the prospective growth rate of 1.4% for 2010 will be achieved or exceeded. It also means that 2% growth can be predicted for 2011, in line with OECD forecasts.

The President has asked the government to continue the economic policy introduced in 2007. The reduction in the public deficit must be achieved primarily by reducing public expenditure. There will be no increase in income taxes, VAT or corporate taxes. Furthermore:

- State expenses will not rise in value during the next three years, with the exception of pensions and the debt burden;

- The value of transfers from the State to the local authorities will be stabilized from now on;

- The programme of not replacing one retiring civil servant in two will be continued;

- The value of the index point for civil service pay will not be raised in 2011;

- There will be a 10% decrease in State operational costs and public spending by 2013, with a 5% cut from 2011;

- €10 billion of tax breaks/shelters and social contribution exemptions and reductions will be eliminated in the autumn;

- The national health insurance expenditure target (Objectif National des Dépenses d’Assurance Maladie – ONDAM) will go on falling, by 3% in 2010, and then by 2.9% in 2011 and 2.8% in 2012;

- Any revenue surpluses will be wholly allocated to reducing the deficit.

The President will organize a meeting with the Prime Minister and the Finance, Social Affairs, Health and Budget Ministers in September, as soon as the Central Social Security Agency (Agence centrale des organismes de Sécurité sociale – ACOSS) payroll forecasts are available, in order to decide the balancing of the social security finance bill. All the necessary steps to ensure that the ONDAM target is met, in 2010 as well as in 2011, will be taken./.

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