EU’s Rehn says French budget plans on track
French President Francois Hollande - REUTERS
BY: REUTERS

BRUSSELS, Sept 26 (Reuters) – France’s planned budget savings and economic forecasts are in line with its European commitments, the European Union’s top economic official said on Thursday, seeking to paper over frustration with France’s modest economic reforms.

Relations have been tense since the European Commission, the EU executive, told Paris to cut spending and reform its pension system in return for a two-year reprieve on meeting European budget targets.

President Francois Hollande has warned the European Commission not to tell France how to reform its frail economy, and his finance minister Pierre Moscovici put on a brave face in his visit Brussels, a day after presenting the French budget.

“France has made a huge effort to restore its public finances, and this draft budget law is characterized by responsibility and prudent policy making,” EU Economic and Monetary Affairs Commissioner Olli Rehn told a joint news conference with Moscovici.

“The hypotheses which are the basis of this draft law are very likely to materialize,” Rehn said.

Moscovici presented France’s 2014 budget to parliament on Wednesday and plans 15 billion Euros ($20 billion) in savings to try to reach a deficit of 3.6 pct of economic output, in a year where economic growth is predicted at just 0.9 percent.

But having backtracked on its original deficit target, Brussels worries Paris is not taking radical enough action to combat rising labor costs, a falling share of international export markets and an industrial decline, threatening a shock to its economy that would resonate through the euro zone.

Rehn said he was happy with France’s direction, but avoided any comment on Hollande’s meek pension reform plans, which do not meet the Commission’s demands to raise the country’s retirement age.

Though the reform will lengthen the number of years worked, it does not change the legal retirement age of 62 years for a full pension, one of the lowest in Europe.

Under new EU rules aimed at preventing another euro zone debt crisis, countries must submit their draft 2014 budgets to the Commission by Oct. 15.

They are then scrutinized for any shortcomings, whether they be unrealistic revenue projections, insufficient spending cuts or base financing that relies more on creativity than reality.

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