Brussels tightens its grip on the poor with the complicity of the Socialist government.
The hard adjustment made by the French government provide are part of what it calls ‘deep reforms’ launched by President François Hollande. Those reforms have already resulted in a draft budget for next year.
The Government plans to reduce public spending by 21,000 million euros in 2015, of which at least 9,600 million will come from social programs. As experts have pointed out, the proposed reduction is unprecedented. “No savings plan is painless,” had warned the day before President Hollande.
With the figures now known, the government has already finalized its plans to distribute 50,000 million in three years provided for in the Covenant of Responsibility launched by Hollande and executed by Manuel Valls. In 2016 and 2017, the reduction in social spending may reach 14,500 million annually.
Overall, social programs, with an adjustment of 20,000 million euros, will again be the most affected. The other two main sections cut by 2017 are spending (19,000 million) and local authorities (-11.000).
Of the 9,600 million in social cuts by 2015, the state aims to achieve at least 3,900 million in budget cuts in Social Security, which has a deficit of more than 10,000 million.
The cuts in family allowances, for example, will mean at least 700 million euros. Thus, aid for each child born will be reduced to one-third or 308 euros, instead of 923 euros.
Some 3,200 million will come from further adjustments in the rates charged to health insurance for each service they provide. Another 500 million, will be cut with what the plan calls improvements in management.
More savings will allegedly come from the already approved freezing of pension payments, except for those who receive less than 1,200 euros a month. Nevertheless, the government ensures that the quality of public health services will not be affected.
Along with social programs, the other two areas that will experience further cuts in 2015 are the operating expenses of the state with 7,700 million euros and the amounts allocated to local authorities, for the most part municipalities which will see their budgets reduced by 3,700 million euros.
Despite the profound adjustments, public finances remain weak due to unbalanced growth which will reach only 0.4% this year and 1% in 2015.
This year’s finances will end with a public deficit of 4.4% and next fall will only be reduced by a tenth. France, therefore, is obliged to ask for a third extension to Brussels because of the violation of its commitment to stop the deficit and to keep it below 3% in 2015, which will not be achieved until 2017.
“France has already exercised its responsibility. Europe must also do so now, “said the Finance Minister, Michel Sapin. The Government understands that Brussels and Berlin have already adopted these budgets “credible reforms” and, therefore, now the EU will be more flexible in their demands for deficit reduction and will undertake policies to encourage growth and reinforce austerity.
Government spending and debt will also continue to grow despite the expected sacrifices. This year, France will spend 56.5% of its GDP in public spending. That is one of the highest percentages in the world.
The debt just surpassed the iconic figure of two billion or 95.6% of GDP, and Paris has to spend 45,000 million euros a year to pay the interests on its debt.
In fiscal matters, the budgets of 2015 include an increase of two cents on diesel tax, in order to devote income to large infrastructures. On the contrary, it is expected to lower its income tax on wages below 12,000 euros per year, which will result in a loss of state revenue of 3,000 million euros.
Above facts and figures, the budget framework presented now demonstrates that, despite all the resistance, including internal among the Socialists, Hollande and Valls are more than determined to go ahead with their reforms. “There is no alternative,” he repeats over and over.
The question that neither Hollande nor Valls seem to answer is, why is it that, even with all this sacrifice, France’s spending cuts are not achieving its targets? Why in an eminently socialist country are the cuts taken from social programs and not elsewhere?