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France

Sarkozy promises new measures to tackle deficit

Reuters/Eric Gaillard

French President Nicolas Sarkozy has promised a new plan to reduce France’s deficit to be drawn up within two weeks. Sarkozy cut short his Riviera holiday for an emergency meeting Wednesday morning amid speculation that France might lose its AAA rating with credit agencies.

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Sarkozy has ordered Prime Minister François Fillon and Budget Minster Valérie Pécresse to bring proposals to a meeting on 17 August, where they will be fine-tuned for presentation to the first cabinet after the summer holidays on 24 August.

To reduce the deficit the government could:

  • Cut social spending;
  • Reduce tax exemptions;
  • Raise taxes.

Sarkozy has repeatedly pledged not to raise taxes.

The measures must respect his declaration that “commitments to reduce the public deficit are inviolable”, a presidential palace statement said.

The president cut short his holiday on the French Riviera because of worries that France’s credit rating might follow that of the US, which saw Standard & Poor downgrade its rating on Friday.

Dossier: Eurozone in crisis

The French deficit is estimated to be 5.7 per cent of Gross Domestic Product (GDP) and the government has promised to cut it to 4.6 per cent next year and 3.0 per cent in 2013.

Sarkozy also repeated his call to fight public debt “despite partisan differences”, as the Socialist Party continues to oppose his move to amend the constitution to make a balanced budget obligatory.

French industrial production fell 1.6 per cent in June, after a 1.9 per cent rise in May, according to statistics released Wednesday.

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