Wednesday

2nd Dec 2020

Sarkozy to announce fresh austerity as France sucked into whirlpool

  • Sarkozy has given ministers one week to come up with fresh measures (Photo: consilium.europa.eu)

French President Nicolas Sarkozy on Wednesday (10 August) has said his government will produce fresh measures to slash the country’s large public debt in an effort to stave off a cut to France’s triple-A credit rating.

The leader flew back from his summer holiday and hauled government ministers back from theirs for an emergency meeting to address the rapidly worsening eurozone crisis.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

He told his key ministries they have a week to draft sharp new austerity measures, which may include the closing of tax loopholes and spending cuts.

Paris’ promise to reduce the budget deficit from 7.1 percent in 2011 down to three percent by 2013 will be maintained no matter how the country’s economic situation evolves.

While credit rating agencies have said that the outlook for France remains stable, earlier growth predictions of two percent this year and slightly higher in 2012 may turn out to be not quite so rosy after stagnating in the second quarter of this year. Industrial production slipped by 1.6 percent in June.

If the growth predictions are not realised while deficit reduction must still be met, then the revenue gap must come from somewhere: further austerity or tax rises.

It is understood that included amongst ideas already under consideration will be the elimination of a slew of tax loopholes, freeing up monies in the single-digit billions.

Firmer figures on the growth rate for the second quarter are to be released on Friday (12 August), potentially piling up the pressure on the government.

The schedule for the announcement of new measures is frantic.

Following the delivery of new austerity proposals from his ministers, Sarkozy and his prime minister, Francois Fillon, are to decide on what must be cut in the 2012 budget on 24 August. Parliament will then consider the measures sometime in the autumn.

The crisis meeting came as French bank shares suffered a mass sell-off on Wednesday.

Societe Generale slumped 21 percent at one point, with Credit Agricole down 13 percent and BNP Paribas down 10 percent.

The tumble is the product of growing worries of French financial institutions’ exposure to Italian debt: estimated to be some €410 billion.

Separately on Wednesday, the Dutch prime minister returned home from holiday to ready the approval of new Greek bail-out measures by the country’s parliament.

Merkel and Sarkozy meet as Berlin rejects eurobonds

The leaders of France and Germany are meeting on Tuesday in a further attempt to stem the eurozone debt crisis following last week’s strong market turbulence, but Berlin has ruled out any mutualisation of euro countries’ debt.

France launches inquiry after accidental downgrade

France has reacted with anger after a major ratings agency accidently suggested it had downgraded its credit rating status, but a prominent French economist believes the country is fighting the inevitable.

Eurozone bank buys record €22bn in bonds to contain euro crisis

The European Central Bank last week spent a record €22bn buying eurozone government bonds in a bid to prevent the eurozone debt crisis spreading, a move that is likely to fuel debate on the creation of eurobonds. Details of the buying spree came on the eve of a meeting between the French and German leaders in Paris.

Budget deal struck, with Hungary threat still hanging

Ultimately, the European Parliament managed to squeeze an extra €16bn in total - which will be financed with competition fines the EU Commission hands out over the next seven years, plus reallocations within the budget.

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic climate debate on 17 November!
  2. UNESDAMaking healthier diets the easy choice
  3. Nordic Council of MinistersUN Secretary General to meet with Nordic Council on COVID-19
  4. UNESDAWell-designed Deposit Return Schemes can help reach Single-Use Plastics Directive targets
  5. Nordic Council of MinistersNordic Council meets Belarusian opposition leader Svetlana Tichanovskaja
  6. Nordic Council of MinistersNordic Region to invest DKK 250 million in green digitalised business sector

Latest News

  1. EU law needed to protect free press, NGOs say
  2. Socialists demand resignation of EU border-agency chief
  3. Orbán ally admits he was at Brussels lockdown 'sex party'
  4. Legal battle over oil giant Shell's emissions begins
  5. Chance for Christian Democrats to draw line against extremism
  6. Frontex takes transparency activists to EU court
  7. EU's opportunity to curb online politics ads
  8. China and Russia encircling divided Western allies

Join EUobserver

Support quality EU news

Join us