IMF To France: Cut Spending Or Risk Downgrade

Merkel Sarkozy

Photo: AP

The International Monetary Fund has issued a warning to France, telling the country that unless more spending cuts are implemented they will miss their plan to have the budget deficit 3% of output by 2013. reports the FT.A new report from the IMF found that France’s growth and tax revenues are unlikely to meet French expectations.

In order to make up the shortfall, the country should cut spending or face a downgrade, the fund recommended.

“France cannot risk missing its medium-term fiscal targets given the need to strengthen implementation of the (EU) Stability and Growth Pact and keep borrowing costs low by securing France’s AAA-rating,” the report says.

French tax rates are already amongst the highest in Europe, EUObserver notes, leaving little room for tax increases.

Sarkozy now faces a difficult decision between deeper spending cuts and remaining popular for 2012’s re-election campaign. He has already pledged cuts every year until 2014, reports Bloomberg.

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