France Ready To Trim Budget Deficit Following Warning

by Ulrika Lomas, Tax-News.com, Brussels

21 November 2002

According to reports this week, France's Finance Minister, Francis Mer has indicated that the country is prepared to move on reducing its budget deficit, following the initiation of 'early warning' proceedings by the European Commission.

In a statement released by the EC on Tuesday, it was announced that 'The Commission decision is based on the Commission autumn forecast published last week (IP/02/1659), which indicates that the general government deficit in France could reach 2.7% of GDP in 2002 and 2.9% in 2003.'

Excessive deficit procedures were also launched against Germany, which is facing a 3.8% deficit this year, although this is due to fall to 3.1% of GDP in 2003.

Responding to the announcement, M. Mer suggested that the government is now ready to begin reducing its deficit, and hinted that spending cuts could be in the offing, observing, according to the Financial Times, that:

'We don't need to modify the [stability] pact because it is our responsibility to succeed in controlling deficits.'

Earlier this year the French Finance Minister found himself isolated when he refused to reduce the country's deficit by 0.5% in line with European Union rules, arguing that the government had 'other priorities'; namely the introduction of tax cuts promised in the run-up to the elections.

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