France must take “credible” steps to tackle its high deficit, its new finance minister said Thursday, shortly before a major credit ratings agency gives its verdict on the country’s sovereign debt.
Antoine Armand spoke to AFP on the sidelines of the Annual Meetings of the International Monetary Fund and the World Bank in Washington ahead of a Moody’s decision, expected Friday, on France’s credit rating.
The IMF forecasts that France’s public deficit will be 6.0 percent this year, and remain there through 2029.
But these figures do not include France’s recent budget proposal, which predicts a deficit of less than three percent in five years’ time.
Vitor Gaspar, who heads the IMF’s Fiscal Affairs department, told reporters on Wednesday that the IMF was “waiting for more clarity coming from actual enacted measures in France.”
Asked about these calls for clarity, Armand said additional details of his government’s plans would be forthcoming.
“It’s normal for the IMF to need a line-by-line breakdown to understand our trajectory,” he told AFP. “And additional spending savings will be documented in the parliamentary debate.”
“The work we’ll be doing over the coming months will be to monitor and fine-tune our public spending in order to make these savings,” he added.
Brussels has already rebuked France for breaking its budget rules, placing the country under formal procedure in July because its deficit is above the three percent limit eurozone members are supposed to adhere to.
“Our partners have a fairly accurate analysis of the French situation, which I have shared with them since my appointment,” Armand said, adding that France’s economy was “robust,” with the lowest unemployment rate for 40 years.
At the same time, “public finances are a cause for concern,” he said.
Armand noted that one of the key planks to boost growth in the government’s new budget rested on convincing French consumers to spend more of the money they earn.
“In a world where the French have saved a lot, if we reduce our deficits, dissaving (spending more money than is earned) will generate consumption and growth,” he said, adding that lower interest rates would help support business investment.
The US ratings agency Moody’s is set to deliver its verdict on French government debt later Friday, amid concerns it could downgrade France from its current Aa2 rating, Moody’s third-highest credit score.
Asked if he feared France’s credit rating was under threat, Armand replied: “We’ll see.”
“Our debt is sustainable, it is bought, it is financed, it is viewed with a certain quality,” he said. “If we want this to remain the case in the future, we need to straighten out our accounts and reduce our public spending.”
“We don’t decide France’s policy on the basis of rating agencies,” he added.