France Should Ease Deficit Reduction to Sustain Growth, IMF Says The French government needs to continue freeing up its labor market and avoid new taxes to sustain recent signs of economic recovery, an International Monetary Fund staff report said. The government will have completed two-thirds of the effort needed to bring its deficit to a stable position by the end of this year and it “should ease the pace of adjustment,” the IMF said in the report today. “The government needs to rebalance efforts and reduce spending rather than increase taxes.” The Washington-based IMF said the French economy will contract 0.1 percent this year and rebound 0.8 percent next year. The 2013 prediction is a return to what the IMF forecast in April. In June, the IMF forecast a decline of 0.2 percent. President Francois Hollande’s government needs to build on its recent steps to cut payroll taxes, allow companies more flexibility in setting wages and improve job training. “The slow pace of reforms needed to make the labor and product markets more competitive have also undermined the economy’s potential to grow,” the IMF said. In a written response attached to the report, France’s representative to the IMF, Herve de Villeroche, said the government’s deficit cutting plans comply with the IMF’s recommendation and cited talks about cutting losses at the pension system. He rejected the IMF’s recommendation to freeze the minimum wage and said his government expects higher growth than the IMF, which he said hadn’t taken into account recent European Union programs to boost jobs. The French government will announce its latest growth forecasts when it presents its 2014 budget later this year.
Posted on: Tue, 06 Aug 2013 13:16:32 +0000
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