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Published on September 6, 2011
Interview given by François Baroin, Minister for the Economy, Finance and Industry, to the Brazilian newspaper “Estado de São Paulo” (excerpts)

Paris, August 30, 2011

Q. – The markets have given a timid welcome to the French fiscal package. Is there room for new measures?

THE MINISTER – The French government last week made a major effort to the tune of €12 billion, a raft of measures enabling us to achieve the public deficit reduction targets: 4.5% next year and 3% in 2013.

Through our taxes, we’re protecting the most vulnerable members of the public and creating a new tax on high earners. It was a political choice we took because there was a threat to the recovery if, for example, we increased income tax or VAT. We ruled out such an option because the French system relies on consumption and we decided to protect spending power. But it’s a plan that’s being adapted. Our measures weren’t of the same proportion as in Italy, Spain or Greece, but we’re not in the same situation.

Q. – The European Financial Stability Facility has said the Euro Area will overcome the debt crisis in 2014. Do you agree?

THE MINISTER – It mentioned Greece in 2014, and probably rightly. For my part, I believe 2013 is an important date for the Euro Area. The countries must regain deficit levels below [where they stood in] the crisis. But we can’t forget that this is the biggest crisis since 1929, and the lesson for the Euro Area is twofold: we can’t continue to live with a sword of Damocles over our heads, and we must coordinate international trade better at global level in order to avoid distorting factors, while bringing in new economic powers like China and Brazil.

France and Germany are going to make proposals to make the Euro Area’s governance more effective. We’ll try to move as quickly as possible so that the European Facility is already operational in September.

Q. – Does the possibility of a recession in the United States affect Europe?

THE MINISTER – It’s indisputable that a negative impact on the United States sparks reactions around the world and in Europe. We’re going to remain vigilant, as we are with regard to all other problems which may arise. (…)

Q. – What’s the prospect for Europe if the U.S. Federal Reserve doesn’t adopt a third round of Treasury bond purchases – so-called quantitative easing?

THE MINISTER – The American situation is characterized by the symbolic nature of the American credit rating downgrade. But there are also positive points we must focus on. Job creation has been higher than hoped in the United States and France. But the main question – beyond sovereign intervention by central banks – is establishing a timetable for debt reduction. We must adopt these measures, but without interrupting growth.

Q. – The stagnation of Europe and the United States has led companies to cut their costs and compete for emerging markets. In response, countries like Brazil have taken protectionist measures…

THE MINISTER – Protectionist measures can provide a short-term national response, but can’t be a response in the international framework. Everything is linked. No country in the world with ambitions for its people – to increase income levels, social welfare levels, the level of education – can operate with an economy based on domestic policy. That’s why our concern at the G20 will be to make this a summit for action. We’re going to insist on the points that unite us and not those which may be under dispute./.

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