German Commentators Forecast Austerity in France
The new French government may have to drop its opposition to austerity after new figures reveal that the economy is not doing as well as expected. German commentators argue that tough spending cuts will be needed if Paris wants to meet its deficit targets.
After the new French prime minister announced bleak figures for the country’s economy, tough months ahead are expected in France. The news could mean that Paris, too, is forced to embrace austerity, despite French President François Hollande’s vocal opposition to belt-tightening of the kind that Berlin favors.
“The situation is serious,” French Prime Minister Jean-Marc Ayrault told the French parliament on Tuesday, reacting to figures from the state auditor which showed that previous growth forecasts had been over-optimistic. The French economy is now only expected to grow by only 0.3 percent this year, rather than 0.7 percent, as the previous government of former President Nicolas Sarkozy had predicted. Growth would be higher in 2013, at 1.2 percent, Ayrault said, but that is still below the 1.75 percent forecast.
The Court of Auditors also revealed that the government will need to find savings of €33 billion ($42 billion) next year in order to reach the European Union’s deficit goal of 3 percent of gross domestic product. Cuts of between €6 billion and €10 billion will already be needed in 2012 if France is to achieve a deficit of 4.4 percent of GDP for this year, a milestone which it has already promised as part of a budget plan sent to Brussels.
The French prime minister said that the new government would tackle the problem by focusing on stimulating growth rather than the tough austerity which has marked German Chancellor Angela Merkel’s approach to the euro crisis and which has been strongly criticized by Hollande. Ayrault said that the government still planned to create 150,000 state-funded jobs and hire many more teachers and police, as Hollande had promised during his election campaign. The prime minister also confirmed that the government was to go ahead with raising taxes on the wealthy. Under the plan, an income tax rate of 75 percent will be imposed for income of more than €1 million.