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France faces further financial pain

Monday, July 02, 2012 - 02:12

July 02 - President Hollande needs to find around 40 billion euros to meet European deficit targets for this year and next. Joanne Nicholson reports

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Haute couture in Paris - it sends a message round the globe that Paris is fashion, and fashion at this level equals wealth. But as the rich and famous gather this week to see what latest designs they could be donning for a hefty sum, a different price tag is being dreamt up by the country's President to find the money to make up a shortfall in the budget. Francois Hollande will need somewhere between six and 10 billion euros if he has a hope of meeting European deficit targets for this year. And the very wealthy are in the line of fire for tax increases. But it's not just them, and it's not just this year he needs to worry about. Just seven weeks ago Hollande came into power promising an end to austerity. Now after an audit of France's finances, he may not be able to. In 2013, France will need to make savings of 33 billion euros. With such a huge sum, the next victims look certain to be in the public sector, and that will be a bitter pill to swallow for those who voted in a socialist as their leader. The President of the French court of auditors, Didier Migaud, puts a more positive spin on it. (SOUNDBITE) (French) PRESIDENT OF THE FRENCH COURT OF AUDITORS DIDIER MIGAUD SAYING: "We don't call this austerity but a rigourous management. What we are saying is that the effort is important, if it is not carried out now this effort risks being heavier and more painful tomorrow with all the possible consequences if our debt spins out of control." Even if this year's target is met, public debt is set to reach 90 percent of GDP - making it near impossible for any growth in the economy. Hollande's popularity has already slid seven points to around 51 percent. France currently spends 56 per cent of GDP on the public sector - that's more than most other European countries. Hollande must now decide whether to reduce that or tax harder, risking accusations of betrayal amongst his supporters. Joanne Nicholson, Reuters

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France faces further financial pain

Monday, July 02, 2012 - 02:12