France to impose freeze on central government spending
7 May
France is set to enforce a freeze in the spending of the central government for three years starting 2011 as it moves to strengthen the country’s fiscal integrity in the midst of the turmoil that affected the eurozone.
Prime Minister François Fillon earlier stated that the spending of the central government, leaving out pension on civil service and payments on debt interest, would be put to a freeze in cash terms starting 2011. The spending of the central government has risen in the last two years relative to the inflation.
Fillon also stated that the running costs of the government would be cut by 10% over the coming decade.
The nation has a public debit of 8% of gross domestic product (GDP), and the public debt is anticipated to reach 83.6% of the GDP the present year, the forecast of the European Commission states.
A so-called freeze in the spending of the central government will play a little role in lessening the debit because local authorities and the social security system account for a bigger share of public expenditure as opposed to the spending of the central government.
However, with Paris eager to fortify economic policy synchronisation in Europe, the timing of the announcement of Fillon was perfect.
“If everyone is running towards fiscal consolidation, you have to be part of the pack”, noted Gilles Möec, Deutsche Bank’s senior economist.
While President Nicolas Sarkozy had identified the restructuring of pension as the major concern in his last two years in office, it would take some time for the savings to materialise, added the economist.
