France hasn’t balanced its budget since 1974. And that won’t be changing in the foreseeable future. Last week, the government said that its deficit – its annual overspend – would come in at 4.3% of GDP next year, far bigger than the 3% agreed with the European Commission. It now doesn’t expect to hit that target until 2017.
So, we should expect a “bruising review process” when the Commission looks at the French budget next week, says Jack Duffy on Mninews.marketnews.com.
The French government is signalling it will get on with structural reforms in exchange for more fiscal breathing space.
That’s just as well, says Duffy, as credit-ratings agency Fitch has said measures taken so far to boost France’s long-term growth potential don’t “appear sufficient” to get the economy going again. Still, at least they “contain a decent dose of common sense”, says The Economist.
What’s more, after a major reshuffle, this Socialist government has become “the most reformist… France has seen for many years”. Next year will see the “hefty social charges” paid by employers cut, says The Economist, a move designed to stimulate hiring.
The government is trying to trim public spending too, which has reached 57% of GDP. And the 75% top tax rate “will be quietly allowed to die”.
Now the plan is to liberalise Sunday trading and expose cossetted businesses, such as taxi drivers and pharmacies, to competition – it’s illegal to sell paracetamol in a supermarket, for instance.
But resistance will be fierce: pharmacies have already held a one-day nationwide strike. Air France’s strike is another example of vested interests digging in their heels.