PARIS (MNI) – French President Francois Hollande on Tuesday
confirmed his pledge to compress public spending in order to bring
public finances into balance by 2017.

After E20 billion in tax hikes planned next year to cut the public
deficit to 3% of GDP, Hollande said the remaining consolidation would be
based largely on spending cuts, on average E12 billion per year.

“We can do better by spending less,” he told the media, citing
twice the relatively high 56% of GDP that passes through the public
sector.

Hollande pledged to stabilize VAT rates after the hike planned for
2014 but left open the door on the broader CSG tax on incomes and
investment revenues in the context of financing social programs. Major
environmental taxes are also looming for the coming years.

Questioned repeatedly by journalists on his commitment to next
year’s 3% deficit target, even if economic growth falls short of the
budget assumption of 0.8%, Hollande pledged to defend France’s credit
rating.

“It’s among the European [partners] that we must pose the question
of the pace” of fiscal consolidation, he said. “But I won’t take the
risk for France”.

“France must bring its public finances into order,” he said, “but
also accompany this adjustment by a determination for growth.”

By helping to solve the financial problems of Greece and Spain,
Europe can accelerate a solution to its debt crisis, he argued. “Then
confidence will return and growth as well.”

“Technical” modalities must be found to allow Greece more time to
reduce its debt without increasing the costs for its partners that must
be ratified by their parliaments, he said. At the same time, he called
on Germany to “demonstrate solidarity”.

The marathon press conference after six months in office was a test
for the president, who is approaching record lows in opinion polls. With
determination, enthusiasm and often humor, he defended the measures of
his government to cut the deficit and bolster competitiveness and
promised further structural reforms in the coming months.

Hollande put great emphasis on the ongoing negotiations between
unions and employers over labor market reforms to give business greater
flexibility while at the same time greater security for employees, and
said the government would take action if no accord were reached. He
reaffirmed his pledge to reverse the upward trend in unemployment by the
end of next year.

A reform of the banking system to be unveiled next month will
assure a separation of lending and savings operations from those of
“speculation”, channel savings to investment and ban “toxic products”,
he promised.

Hollande remained firm on his opposition to prospecting shale gas
reserves.

–Paris newsroom +331 4271 5540; e-mail: ssandelius@mni-news.com

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