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Sarkozy presents budget cutbacks

Latest update : 2008-04-05

French President Nicolas Sarkozy has detailed his proposals to trim the French budget. The cutbacks are aimed at achieving his zero deficit goal by 2012.

PARIS - President Nicolas Sarkozy on Friday announced a rationalisation of the French state and a cut in public spending, but failed to spell out how he planned to balance the budget by 2012, as promised to the European Union.

 

The budget ministry said the package of 150 reforms would start generating savings from next year, rising to 7 billion euros ($11 billion) by 2011.

 

However, Sarkozy pledged to plough some of this back into the civil service and analysts said the net result would make little dent in France's deficit, which jumped to 2.7 percent of gross domestic product in 2007 from a forecast 2.4 percent.

 

In a speech at the Economy Ministry, Sarkozy said he would stick to his campaign promise to reduce France's army of public sector workers and tackle inefficiencies across government, including in the military and diplomatic service.

 

"The time for reforms has come," he said, making clear that he did not believe in austerity plans.

 

"It is not by economising that you make reforms. Rather it is reforms that allow you to economise. That is the difference between austerity and reform," he said.

 

His message did not convince analysts, who calculated that the net saving for the reforms represented just 2 percent of state spending and compared with an annual budget deficit of 50 billion euros.

 

"Seven billion euros is not exactly a drop in the ocean but it doesn't measure up to what is needed and above all, it doesn't resolve the short term problems," said Alexander Law, head economist at economics consultancy, Xerfi.

 

PROTESTS

 

The government has raised its 2008 deficit projection to 2.5 percent of GDP from 2.3 percent previously as a slowdown in growth is expected to weigh on tax receipts.

Some analysts, including Law, believe the figure will end up over three percent, in violation of EU rules.

 

Sarkozy said France was spending 20 percent more a year than it was receiving in tax returns and had hired an additional 300,000 civil servants since 1982.

To tackle this, he said he would honour an electoral pledge not to replace half of all retiring state sector workers.

 

This promise is sparking protests, with school students regularly taking to the streets to denounce cuts in teaching numbers. Nationwide rallies on Thursday, at least two of which turned violent, suggested the movement was growing.

 

Sarkozy said efficiencies could also be wrung from the military, which had distinct administrations for the army, navy and air force. In addition, he called for a change in rules that meant 70 percent of people were eligible for subsidized housing.

 

The opposition Socialists have accused the government of secretly preparing an austerity plan to try to contain the deficit and dismissed Sarkozy's speech as gimmicky.

 

"This is a kind of cop out. Talking about 2011 or 2012 without saying what you're going to do from this year is a way of hiding behind fine speeches about reforming the state," said Michel Sapin, a Socialist party spokesman on economic affairs.

 

Friday's announcement followed a similar operation in December, when Sarkozy outlined a series of measures aimed at reducing red tape in France and improving state services.

 

A third and final raft of proposals are due to be unveiled in May, looking at welfare benefits and social spending.

Date created : 2008-04-04

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