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France tries to avoid recession with austerity budget

France tries to avoid recession with austerity budget
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France’s finance minister has insisted that his country is not at risk of sliding back into recession as he presented an austerity budget seen as important to stabilising the euro.

Francois Baroin said cutting too much could lead to a “slippery slope” toward recession, but keeping spending under control was the priority: “The purpose of this budget is to consolidate our income so as to meet our international commitments, to stay on track to reduce our debt and to make sure we reach our firm goal of a public deficit of 5.7 percent of GDP this year. This has been confirmed by the European Commission, in agreement with the OECD and the International Monetary Fund.”

His options are limited by France’s relatively weak growth forecast to be 1.75 percent this year and next.

The deficit target is 5.7 percent of GDP down from 7.1 percent last year.

High unemployment is another problem though it did ease slightly in the second quarter to 9.6 percent of the workforce for the French mainland and France’s overseas territories. Paris has struggled to bring the jobless rate down significantly.

The government needs to balance promoting growth with saving money for its contribution to bailouts of struggling euro zone countries like Greece.

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