November 6th, 2011
04:11 PM GMT
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The party’s over and the guests have finally gone. Now, it’s time to tackle the washing up.

After weeks of hosting summits in Brussels, then Cannes, designed to sort out everyone else’s problems, French President Nicolas Sarkozy returned to Paris at the weekend to tackle the economic battle on his home front.

The French Cabinet will hold a belated weekly meeting on Monday and the agenda is likely to be dominated by the nation’s home-grown austerity plans. The timing couldn’t be more apt, given the precarious nature of Greece (and France’s $56 billion exposure to it.)

If there’s one thing France has in common with its smaller, weaker eurozone neighbours - like Greece - it is that with growth stalling it is becoming increasingly difficult for such countries to keep to their deficit targets.

Just last month, France cut its growth outlook to 1 percent for next year from 1.75 percent. That figure had already been revised downwards from 2 percent during the summer. As growth slows, so the revenues otherwise needed to pay down the deficit also flow less freely.

This is why France has said it will need to push through an additional $8 billion to $11 billion worth of extra austerity, to make sure the public shortfall does not exceed its targeted 4.5 percent of GDP.

You see, France must show it is serious about tackling its finances - or else it could find itself losing its coveted AAA rating.

Just as what happens in Greece may affect France, what happens in France may have serious implications for sorting out Greece’s financial mess. This is because if France’s rating is cut, that would undermine the eurozone’s ability to raise cash for its bailout fund - or EFSF - for one of its main guarantors would appear less credit worthy.

So how much can France glean from the new proposals?

Le Journal du Dimanche reckons the new combination of additional tax hikes and spending cuts would likely include:

• Increasing VAT on restaurant bills, catering services and building works from 5.5 percent to 7 percent, maybe even 9 percent. Such a move would bring in between 1 and 3 billion euros.

• Companies with revenues of over 500 million euros could be asked to pay more tax. This could bring in a further one billion euros for state coffers.

• Health insurance reimbursements could be cut to 2.5 percent from 2.8 percent saving 500 million euros

• One of the public holidays could be cut, saving 2 billion euros

• The cost of government could be cut by 900 million euros.

These are some savings for sure, but as economists often caution, austerity must be accompanied by plans for growth to ensure the pain and gain aren’t mutually exclusive.

soundoff (19 Responses)
  1. BK

    After the most recent successes in the campaign of neo-colonism they've started in Ivory Coast and Libya, it's almost certain Mr.Sarkozy will do fine. After all, weren't their economic troubles due to China's pressure in Africa? Now, the good ol' Europe is back to their roots, all will be fine for them as long as blood flows.

    November 6, 2011 at 5:22 pm |
  2. DCfrog

    Can CNN not afford a Paris correspondent who speaks french? And what about copy writers who check for obvious nonsense? Health insurance reimbursements could be cut to 2.5 percent from 2.8 percent ??? It is the increase/progression in Health insurance reimbursements which will be limited to 2.5 percent !

    November 6, 2011 at 6:49 pm |
  3. Dutcham

    A Paris correspondent who speaks French? France has become a sideshow and I'm surprised they've been sending over any correspondent at all.

    November 6, 2011 at 7:42 pm |
  4. Ramirez

    France is one of the few countries in Europe that seriously look at their financial problems and do something about it. Instead of doing nothing, and collect money from neighboring countries.

    November 6, 2011 at 8:07 pm |
  5. KickfranceoutofAfrica

    France is getting down to steal more from Poor people in Africa..F sarko.

    November 6, 2011 at 8:58 pm |
  6. wolfgang munster schnozle

    France is nothng but a laughing stock after there G20

    Someone shoud send them the bill for waisting everyones time, money and patience.

    November 6, 2011 at 9:33 pm |
  7. CaptCavern

    France is one of the few country in this world which is having great fundamentals. Its debt goes to education, health, infrastructures (highways, trains, airports,...), not to selected people making their own profit. This is why the AAA is given by our US quotation agencies whatever is the economic situation (only N.5 economy). At the end (and no one knows how this crisis will finished...), it will remains a highly civilized country with large potential for investors and tourism (first worldwide destination with 75M/year). Let's compare with UK, Russia, Italy, Spain or India. When you want to invest or visit in Europe, where do you want to put your stuff? Looks to me that France is still an appropriate choice...

    November 6, 2011 at 10:49 pm |
  8. Dano

    Now THERE'S a headline that surprised me today. Well done, CNN.

    November 6, 2011 at 11:48 pm |
  9. Carlos


    November 7, 2011 at 12:33 am |
  10. atr

    from my experience with french all I can say is "Don't trust a thing of what they say" They will keep putting a mask of seriousness when in fact nothing happens and they'll show you how good it is to buy an old useless french dress because of the "history" it has... I just don't trust them.

    November 7, 2011 at 7:35 am |
  11. atr

    and about the "fundamentals" of education etc. Don't judge following the statistics they publish. They are usually faked. Go there, see what happens, see their "quality" with your own eyes, if possible stay there longer in order to know people and their skills and then we can discuss about french "fundaments". They are non-existent...

    November 7, 2011 at 7:37 am |
  12. Ducamp

    I am disappointed to read so many comments inspired by xenophobia or simply ignorance of what my country is really. It is sad to see that prejudice and acrimony are so strong in a modern and interconnected society. Fortunately, I could also read this remark concerning the fields where borrowed money is invested : education, culture, subsidies to the unemployed and the poors, etc.

    November 7, 2011 at 1:57 pm |
  13. Kenny

    Nice article Nina but 'You see, France must show it... sounds awfully patronising to the reader!

    November 7, 2011 at 2:21 pm |
  14. Sensi

    @ Dutcham
    FYI, and despite your crass ignorance, they are more Press correspondents in France than anywhere else in Europe. Have a nice day.

    November 7, 2011 at 7:58 pm |
  15. Sensi

    @ BK, KickfranceoutofAfrica

    Must be some Gbagbo wannabe zealot to just mind such a nonsense. Both the Cote D'ivoire help to remove the wannabe dictator Gagbo and the Libyan intervention were backed by UN resolutions and asked either by the legitimate and democratically CI leader or the consensual leaders of a democratic uprising. You must just be some far-lefty whining about having lost two of your beloved dictators.

    November 7, 2011 at 8:02 pm |
  16. Sensi

    @ atr
    Oh another conditioned bigot, no doubt he doesn't know one single french personally and never went to France, but hey far-right propaganda and the bigoted/xenophobic British "press" told him all he has to know about his prejudices. Ignorance must be bliss.

    November 7, 2011 at 8:05 pm |
  17. bridge

    i approve atr about "fondamentals" French society is very different than 30 years ago . Perhaps like in usa or in the occident .

    November 7, 2011 at 9:03 pm |
  18. lovethetruth


    On both accounts, Well Said!

    November 10, 2011 at 9:57 am |
  19. bridge


    November 11, 2011 at 9:50 pm |

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