21/05/2010 - Proposals announced by President Nicolas Sarkozy to confront France's chronic yet urgent public finance challenges are very welcome and merit support, according to OECD Secretary-General Angel Gurría.
The proposals include constitutional reform constraining governments to commit to a fixed path for reducing cyclically adjusted deficits during their legislative term and a parliamentary vote on annual plans sent to the European Commission.
Also included are a three-year freeze on total state spending excluding civil service pensions and debt service, and targeted savings of 5 billion euros on tax and social expenditures. In addition, the limits on public spending increases for health care will be tightened in 2011-2012 and state transfers to local governments frozen.
“France has had an uninterrupted string of public deficits for more than a generation,” Mr. Gurría noted. “With government debt at more than 78% of GDP according to the Maastricht definition and heading for nearly 90% by the end of next year, there is an urgent need to move to a more sustainable fiscal path, especially considering the expected impact of population ageing going forward. The new proposals are very positive in this regard. The new proposals are particularly timely in this regard”.