French government struggles with cuts and expectations

The French government, facing the tricky task of trying to rein in public spending while implementing new President Emmanuel Macron's campaign pledges, has managed to find billions in savings, Budget Minister Gerald Darmanin said Tuesday.

"We have found 4.5 billion euros ($5.1 billion) in savings... solely in the national government," Darmanin told the Parisien newspaper Tuesday. "Neither social security nor local authorities will come into it."

Macron, elected in May, promised while campaigning to keep France in line with EU budget rules which require member states to keep the deficit below 3.0 percent of overall output.

"We will keep France's word," Darmanin said.

The 39-year-old centrist president vowed to restore France's "credibility" in Europe after the country missed the 3.0 percent target every year for a decade. 

France and Spain are the only eurozone members still on notice from the European Commission for failing to meet budget rules.

Darmanin said the savings would be achieved without affecting "the services provided to the French people" or raising taxes, a commitment made by Prime Minister Edouard Philippe.

Budget planners have examined expenditures one ministry at a time.

Among the envisaged cuts are a 526-million-euro reduction at the interior ministry that will be achieved without laying off any police, Darmanin said.

The foreign ministry plans to cut its foreign aid budget -- a decision that came under harsh criticism from humanitarian groups -- while the transport ministry can tighten its belt by 260 million euros by cutting back on infrastructure projects.

- 'Structural' reforms in 2018 -

The budget straitjacket looks set to be even tighter next year, when experts say nearly 20 billion euros in new savings will be needed in order to stabilise spending.

That figure may have to be increased given the latest government announcements.

On Monday the government said it planned to press ahead with cuts to taxes in two areas next year: the elimination of a local residence tax for 80 percent of French households and reductions in wealth taxes.

A plan to delay the measures until 2019 had come under criticism given Macron's campaign pledges to cut taxes for investors and businesses, a core part of his programme.

But the measures will need to be funded either through more efficiency measures, increased tax receipts -- the result of higher economic growth -- or a combination of both.

Senate speaker Gerard Larcher of the rightwing Republicans party described the proposed cuts as half-measures.

"The technique has not really changed. We're talking about cuts instead of asking structural questions," he said. 

Speaking to RTL radio, Darmanin acknowledged that painful "structural reforms" would be necessary in 2018 such as cutting housing assistance and unemployment benefits to bring about permanent spending cuts.

Macron had pledged to bring the public deficit down to 2.8 percent of GDP, but will now have to be satisfied with coming in just under the 3.0 percent bar.

Source: AFP