France snubs eurozone on austerity

The French government today “rejected austerity”, throwing down a clear challenge to Brussels and Berlin over the economic management of the eurozone.

Francois Hollande’s government said it would not impose more cuts to reduce France’s budget deficit below 3% by next year, as mandated by pan-European Union rules.

“No further effort will be demanded of the French, because the government, while taking the fiscal responsibility needed to put the country on the right track, rejects austerity” the budget statement said.

Finance Minister Michel Sapin said Paris had decided “to adapt the pace of deficit reduction to the economic situation of the country”. The French economy has registered zero growth this year.

Previously, France had promised its European partners that it would bring its deficit below 3% by next year, a deadline that had already been extended from 2013.

But under today’s budget plan, the deficit is projected to fall from 4.4% of output this year to 4.3% next year and 3.8% in 2016. It will not dip below 3% until 2017. A new round of snapshots of manufacturing activity in the eurozone showed continued weakness in September.

The overall index was just in positive territory at 50.3, but that was no improvement on August and was a 14-month low. Activity contracted in Germany and France, according to surveys of purchasing managers by Markit.