Auditors to Hollande: Budget Cuts Can Not Wait

In a sobering audit report from accounting watchdog group Cour des Comptes released Monday, President Francois Hollande was given a stern warning: cut the state budget by $54 billion, or face failing to meet deficit targets.

The French government must plug a hole of between €6 billion and €10 billion ($7.6 billion and $12.59 billion) in this year’s budget to meet deficit reduction targets, the audit says. Furthermore, projections for next year suggest budget reduction will be even tougher, with a €33 billion shortfall. This is also assuming a 1 percent growth in 2013, far from guaranteed given the uncertainty of Europe’s economic recovery.

While Hollande has pledged since his campaign to reduce government debt, he has also staunchly opposed austerity measures. His government is aiming for a deficit of 4.4 percent of GDP this year and a balanced budget in 2017. However, the auditors warn that France’s deficit, equal to 5.2 percent of GDP in 2011, remains above the average in the 17-country eurozone and threatens France’s credibility in financial markets. France may not have the fortune to wait.

Cour des Comptes proposed cutting jobs in France’s large civil service, on both a national and local level, and ending tax breaks and loopholes.

Hollande has promised 60,000 new education jobs after many were cut under Sarkozy. Hollande has said he will make up for each new teaching job by cutting another government job elsewhere. Whether this will be sufficient remains to be seen.

Most crippling for Hollande is that the audit comes days after the President helped push through a €120 billion growth package at European Union talks in Brussels. Hollande insisted that an earlier European pact on budget-cutting across the eurozone was excessively hurting workers and urged a government stimulus to boost growth.

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