Hollande Admits Deficit Promise Cannot Be Met

President Francois Hollande on Tuesday admitted that France’s public deficit will “without a doubt” be 3.7 percent of its output this year, significantly above the 3 percent he promised to cut it to during his election campaign last year.

During the French elections last year, Hollande had repeatedly vowed to bring the deficit down from 4.5 percent to 3 percent this year, and had insisted this was possible until his admission of defeat yesterday.

President Francois Hollande on Tuesday admitted that France’s public deficit will “without a doubt” be 3.7 percent of its output this year, significantly above the 3 percent he promised to cut it to during his election campaign last year.

During the French elections last year, Hollande had repeatedly vowed to bring the deficit down from 4.5 percent to 3 percent this year, and had insisted this was possible until his admission of defeat yesterday.

On a two day-trip to eastern France aimed at convincing the public he can restore the economy to health, Hollande on Tuesday admitted that his deficit reduction programme has been blown off-course, but said that a missed target is still preferable to austerity measures that could stifle economic recovery.

The Socialist president is targeting a balanced budget in 2017 and has rejected the austerity remedy to tame public debt, placing stronger emphasis instead on structural reforms and raising taxes to protect the country’s welfare model.

Nonetheless, Hollande said his government had made an “unprecedented” effort to tackle the deficit, bringing it down from more than 5 percent in 2011, adding that “the best economic strategy is to stay on this track without doing anything that can weaken growth.”

“Rebalancing our accounts is a financial obligation… but it is also an obligation of sovereignty because France must never be in difficulty in the markets,” he said. 

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[quote] Hollande’s comments were a clear signal that Paris was not prepared to take bold new steps to achieve the 3 percent deficit target for fear of further damaging an already stalled economy and exacerbating unemployment, which is already at a 14-year high. [/quote]

In February, the European Commission forecast France’s 2013 deficit at 3.7 percent and said that was tolerable as long as the pace of cutting the underlying structural deficit, which excludes swings in the business cycle, remained on track.

But Bundesbank president Jens Weidmann on Tuesday said the reform course in France appeared “to have floundered.”

“Particularly in the big countries it is important that there is a signal that the new (stability and growth pact) commitments are taken seriously,” the central bank chief said. “The crisis that we are facing is a crisis of confidence, and this confidence cannot be gained if we postpone the tackling of the root causes of the crisis,” Weidmann added.

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