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France angles for new EU timetable on budget limits

03 April 2014, 20:52 CET
France angles for new EU timetable on budget limits

Michel Sapin - Photo EU Council

(PARIS) - France's reshuffled government took a combative tone with Brussels on Thursday, with new Finance Minister Michel Sapin saying the "pace" of deficit reduction would be raised in EU talks.

European Central Bank President Mario Draghi quickly fired back that reviewing budget commitments would undermine confidence in the eurozone.

With the European Union pushing France to reduce its deficit, Sapin said he would work with the European Commission to "find the path to common interests".

"Europe will be in better shape when France is in better shape," Sapin said in his first public comments since his appointment on Wednesday.

"We must together share the only important concern: more growth for more jobs, while gradually rebalancing our public finances."

Sapin added that France would not abandon efforts to reduce the deficit, but provided no timeline.

"The goals are goals that we will meet," he said several times.

- EU warning -

Sapin's remarks were in contrast to a warning by eurozone finance ministers on Tuesday that France must respect its promises to meet an already delayed EU deadline for budget limits.

Draghi repeated the warning on Thursday, telling reporters: "Undermining agreed rules undermines trust."

He said eurozone countries had made "important progress" in balancing budgets but should not "unravel past consolidation achievements".

The OECD, which advises rich nations on economic policy, also recommended on Thursday that eurozone nations "continue fiscal consolidation, respecting the requirements of the Stability and Growth Pact..."

France has promised to reduce its public deficit from 4.3 percent of national output last year to under 3.0 percent next year in line with the EU's pact.

But with the economy stagnant and joblessness rising, President Francois Hollande's government is struggling to impose the spending cuts or tax increases needed to rein in the deficit.

The Socialist government is deeply unpopular and reeling from a dismal showing for the party in local elections on Sunday which prompted the reshuffle under new Prime Minister Manuel Valls.

In his first major interview since taking up the post, Valls said late on Wednesday that France has "no choice" but to tackle the deficit.

"It's a question of France's credibility, we must get our debt under control or we will lose our national sovereignty," Valls told TF1 television.

Hollande on Monday indicated France is looking to ease the burden of deficit reduction -- drawing a rebuke from eurozone officials.

France intends to make 50 billion euros ($69 billion) in budget savings over the next three years, decreasing spending and boosting competitiveness by cutting corporate and income taxes.

The new cabinet named on Wednesday reduced the size of the cabinet to 16 ministers from 38 under former premier Jean-Marc Ayrault.

Most senior ministers kept their posts, but finance minister Pierre Moscovici was ousted in favour of Sapin and left-wing firebrand Arnaud Montebourg, who added the economy to his industry portfolio.

The two formally took up their new powers in a ceremony on Thursday, with Sapin saying they would speak "with one voice" on economic and financial issues.

- Confusion on trade -

But the government was already suffering teething problems on Thursday, with confusion over who would be responsible for foreign trade.

Both the economy and foreign ministries initially said they would handle the portfolio, and a ceremony transferring powers between the former trade minister and Montebourg had to be delayed due to the confusion.

Government sources later indicated the portfolio would move to the foreign ministry.

A poll released Thursday showed the French are sceptical about the new government turning around the economy.

Some 43 percent expressed confidence that Valls will be able to engineer a recovery, while 56 percent doubted his chances, according to an Internet survey of a statistically representative group of 997 French adults conducted on Wednesday by Tilder/LCI/OpinionWay.


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