Francois Hollande’s election promise of not imposing austerity upon the French people may prove to become an impossibility after the national audit office for France revealed that the nation’s budget deficit will overshoot by 6-10 billion Euros this year alone.
The report goes on to say that the deficit will reach a huge 33billion Euros by 2013. Hollande is going to have some pretty tough choices to make if he is going to bring Frances budget in line with EU rules and not break his pledge of promoting growth over cut backs.
Any decisions he takes that promote the use of heavier taxation and cuts to public services is sure to draw anger from members of his own political party as well as the voters that voted him to power in the first place.
“The country is in the danger zone in terms of its economy and public finances. We cannot rule out the possibility of a debt spiral,” Didier Migaud, head of the Court of Auditors said in a news conference reported by Reuters. “2013 is set to be a crucial year.The budgetary equation is going to be very hard, much harder than expected due to the worsening of the economic picture.”
The French Prime Minister Jean-Marc Ayrault has revealed what the government will do to boost growth at a session of parliament earlier today. He laid out the socialist government plans for the next five years. In his speech he confirmed plans to hire more teachers and police to create 150,000 state-aided jobs and promote more competitive industry. To help industrial innovation, a public investment bank would be put in place before the end of this year, he said, and the government would also announce a plan shortly to address problems in the auto sector.
He also revealed that the rich, those earning over 1million Euros would be taxed 75% of their income to bolster the country’s treasury. The announcements have caused some concern from financial observers who believe that the proposed measures will only add to France’s budgetary problems.
Auditors warned this week that the French government needed to fill a hole of up to 10bn Euros in this year’s budget to meet targets to cut the deficit. Whilst not in as bad shape as the Spanish, the French have to be careful that they don’t allow the deficient to run out of control and lead them to difficulties further down the road.
If Hollande’s plans to boost growth fail then we could witness him retreat under the flag of austerity but for now the defiant president has vowed to carry on with his plans.
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