It is rare for the prime minister of a European Union member to admit to severe financial difficulties, still less to ‘near bankruptcy’. But the French Prime Minister François Fillon did just that last month, and with the tacit approval of the French President, Nicolas Sarkozy.
Speaking on a visit to Corsica, surrounded by farmers seeking increased subsidies, Fillon added that he was running a country that had been in chronic deficit for fifteen years and which had not operated a balanced budget for twenty-five years. In a radio interview two days later, he repeated that the situation was critical and that France was facing a breakdown of its social security system. This has a projected deficit of twenty billion Euros over the next two years, adding to the government’s overall accumulated deficit in excess of 1,150 billion Euros. The annual cost of financing the French debt now absorbs two thirds of its tax revenues.
Fillon’s objective, a balanced budget by the year 2012, is seen by most economic commentators as unattainable. Although President Sarkozy has announced plans to cut jobs in the public sector and to reduce the benefits of some state pensions, industrial action planned by the largest trade unions may force a retreat. The socialist opposition is particularly critical of tax cuts implemented after the May presidential election, which are said to cost sixteen billion Euros a year.
France’s annual budget for the next twelve months shows a projected deficit of almost 60 billion Euros and this in itself is contingent on a growth in the economy amounting to 2.5%. The most optimistic independent forecast, by the Organisation for Economic Cooperation and Development (OECD), is for 1.8% growth, and even this is regarded as unrealistic by some experts working for the European Union.
October 2007
