Deeper Austerity Measures expected in France for 2014

Finance Minister Pierre Moscovici. Photo: AFP/ERIC PIERMONT

Finance Minister Pierre Moscovici. Photo: AFP/ERIC PIERMONT

As it has become increasingly clear that the French government will not reach its goal of a budget deficit of 3% of GDP for 2014, it has moved to cut about 5 billion euros (6.5 billion dollars) out of the budget for next year.

French GDP grew a paltry 0.1% this year, a rate much slower than even the modest expectation of 0.8%. The deficit for 2014 is predicted to rise to 3.9%, and the unemployment rate is expected to rise to 11%.

While the country has made progress in reigning in its deficit– down from 5.2% two years ago and 4.5% last year–­ finance minister Pierre Moscovici is asking for one more year to bring the deficit to the target of 3% of GDP.

This lag in growth has altered the national consciousness in France, where Hollande was brought to power based on his promises to improve the economy and provide more jobs without relying on austerity measures. Fiscal austerity is dragging out longer than most had thought.

Moscovici assured the French that although France is far from its target, it is in the process of performing major structural reforms to restore competitiveness. He also added that France does not want to push for too many austerity measures for fear of “a political and social shock.” The French government, like others in the euro zone, is looking for more time.

In a government statement Hollande declared, “It would be wrong to take measures that put another brake on consumption and investment. There is no need to add more austerity in 2013. A lot has already been asked of the taxpayer.”

In fact, about 75% of France’s deficit spending has been financed by taxes, and it is the highest taxed country in the euro zone. This year Hollande attempted to pass a 75% tax on the rich, which failed to pass in court.

Germany’s finance minister Wolfgang Schauble did not show much concern that France hasn’t reached its target, saying that he is “fully confident” that France is on the right track.

However, some sectors of French society do not find these messages reassuring. A strike at Air France Cargo that has lasted since February 15 has connected their more specific grievances of reduced work hours and job cuts with the wider austerity trend. Some 160 protesters cried, “expand the fight against austerity!”

Due to the introduction of numerous low-cost airlines and Gulf companies, Air France Cargo has lost much of its competitiveness. The company plans to cut 10% of its work force, which would mean about 5,122 jobs lost. Air France also plans to modify its previous agreements with workers’ unions, cutting RTT leave and time off.

Several other major French businesses, including some in the automobile and steel industries, have found themselves forced into similar measures of cuts and closures.

Some economists argue that this leaves France with no choice but to cut public spending. Prime minister Jean-Marc Ayrault has taken the lead to set up a commission to look into pension reform, further demonstrating the efforts the government is undertaking to cut costs.

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