France to pause austerity, cut spending next year instead: Hollande

PARIS Sat Feb 23, 2013 9:21pm IST

French President Francois Hollande holds his notes as he attends a conference on ''Civil servants in Dictatorial Europe'' at the Sorbonne in Paris February 21, 2013. REUTERS/Philippe Wojazer

French President Francois Hollande holds his notes as he attends a conference on ''Civil servants in Dictatorial Europe'' at the Sorbonne in Paris February 21, 2013.

Credit: Reuters/Philippe Wojazer

PARIS (Reuters) - France will not introduce any further austerity measures this year but instead focus on spending cuts in 2014 to bring its deficit down to three percent of GDP that year, French President Francois Hollande said on Saturday.

The Europe-wide economic slowdown has forced France to delay its target of cutting the state deficit to three percent of GDP this year and the government has said it does not want to impose too much austerity on an economy near recession.

"It would be wrong to take measures that put another brake on consumption and investment," Hollande said at the annual Paris farm show on Saturday. "There is no need to add more austerity in 2013. A lot has already been asked of the taxpayer."

He added that while government efforts to reduce the deficit had until now consisted of more tax increases than spending cuts, that trend would be reversed in 2014.

Finance Minister Pierre Moscovici said on Friday that France would ask its EU partners and the European Commission for an extra year to cut its public deficit below a targeted 3 percent of GDP, and would outline new savings measures soon.

Hollande said his government had brought down the deficit from 5.2 percent of GDP at the end of 2011 to 4.5 percent in 2012. The European Commission expects a French 2013 deficit of 3.7 percent of GDP.

"I admit it is not the three percent, but the movement is going in the right direction, as both the France national audit office and the European Commission recognize," he said.

Spending cuts in 2014 would be made in the state budget, local budgets and the social security budget, Hollande said, reiterating that the government maintained its longer-term goal of a zero deficit in 2017.

Holland said France would continue to try and boost growth through public investment, notably with funds gathered through tax-free savings books and by state investment companies.

But he was downbeat about jobs, saying that if economic growth in 2013 was not better than the 0.1 percent the European Commission expects, unemployment would rise further.

"But if forecasts for one or 1.2 percent growth in 2014 materialize, we will see new job creation again," he said.

He said his cabinet would focus on jobs for young people.

"When youth unemployment rates in some countries are above 50 percent, 25 percent in France, there is a risk of explosion, and I do not want to jeopardize national cohesion" he said.

He said his government expects a report on pension reform to be completed this summer.

That will be followed by talks between unions and employers with a view to implementing pension reforms in 2014.

(Reporting by Geert De Clercq; Editing by Sophie Walker)

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