PARIS--France's newly reshuffled government introduced an
additional EUR4 billion ($5.52 billion) in cost savings Wednesday
aimed at narrowing the euro zone's second biggest economy's budget
deficit to levels required by the European Union.
The new belt-tightening is part of Paris' effort to rein in its
finances after missing its deficit forecast last year. The finance
ministry said the extra EUR4 billion in savings--combined with a
three-year EUR50 billion savings plan the government had previously
announced--was necessary to prevent Paris from running afoul of
Brussels and shedding credibility among other EU countries.
"Our voice counts in Europe, and if we want to continue counting
we obviously need to be irreproachable in terms of our
commitments," Finance Minister Michel Sapin said.
The new cuts expose the delicate balancing act for President
François Hollande as he seeks to fix France's public finances while
seeking to rekindle modest economic growth. The surge of fiscal
discipline is also sowing discord among the political ranks of
President François Hollande's Socialist Party.
Mr. Hollande has pledged billions in payroll tax cuts for French
companies and minimum wage earners in a bid to reignite France's
economy, which Mr. Sapin said he expects to grow by 1% this
year.
To finance those tax cuts, however, he is freezing welfare
benefits and pension payments--moves regarded as controversial
within his Socialist Party. Some lawmakers in his party have
demanded the government scrap the plan, raising questions about
whether the measures will be backed by a strong majority when they
are put to a vote in parliament next Tuesday.
In an unusual display of public discontent with a French
president, crowds gathered in the southern French town of Carmaux
booed Mr. Hollande as he walked down the street. One woman, who
identified herself as 51-years-old and jobless, approached the
leader and chastised him in front of TV cameras.
"I believed in you!" she yelled. "Unemployment, we're fighting
it," Mr. Hollande responded. "I'm disappointed," she added.
In addition to the austerity measures, France tweaked its
deficit targets for this year and 2015, forecasting a 2014 deficit
of 3.8% of economic output compared with the previous 3.6% target.
Next year, the finance ministry forecasts a deficit of 3%--right at
the limit of EU rules--rather than the 2.8% previously
forecast.
The Finance Ministry said it expects public debt to decrease in
2016, reversing a yearslong climb to 95.6% of gross domestic
product.
Mr. Sapin said the government's austerity package is designed to
deliver a "shock of confidence" to France's anemic economy, which
is saddled with double-digit unemployment and labor costs that have
discouraged firms from hiring.
"When you slow or even stop the increase in spending there are
heavy consequences," Mr. Sapin said. "Fifty billion is tough."
Write to Stacy Meichtry at stacy.meichtry@wsj.com
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