PARIS (MNI) – Portugal is doing even more than it promised to
reduce deficits and debt, which should be reassuring to international
investors, France’s Finance Minister Christine Lagarde said Wednesday on
French television.
Asked by France 2 whether Portugal would be the next Eurozone
country to seek aid from the European Union and International Monetary
Fund, Lagarde answered indirectly by touting the efforts made thus far
by Lisbon.
“Portugal is delivering results that are better than the
commitments it has made, which I think are of a nature to reassure
investors,” Lagarde said.
She said she wasn’t surprised by the efforts of the government in
Lisbon, because her Portuguese counterpart had shown his government’s
deficit-cutting commitment in “meeting after meeting.”
“It is imperative that this continue, because reforms to the
structures are necessary,” Lagarde said. “What I vividly hope for is
that they will stick to their commitment and more, and that under those
conditions investors will look on Portuguese debt with sympathy.”
She added that, “in any event, all countries of the [Euro]zone are
in this together. We took a series of measures in 2010. We are
continuing to change the European structure so that there is truly an
economic government of the Eurozone. It is necessary. We have a common
currency; we need to have an economic policy that is perfectly
harmonized.”
On the domestic front, Lagarde said she was sticking with the
government’s forecast of 2% French GDP growth in 2011. For this year,
she said the forecast of 1.5% growth will be met if fourth quarter GDP
— due out Thursday — comes in at the widely-expected rate of 0.6% q/q,
which is the projection of the Bank of France.
“If we have an exceptionally strong fourth quarter, at 0.7%, then
we will be above 1.5% [for 2010], and probably at 1.6%, the finance
minister said.
Lagarde expressed optimism about France’s economic prospects this
year, noting that foreign demand for French goods “remains well
supported,” particularly from some emerging market countries. She cited
as one example a recent order from India for Airbus totaling around E7
billion.
“We have consumption that is holding,” Lagarde said. “I think that
given these conditions, given all the reforms we’ve undertaken on the
initiative of the president of the republic and the prime minister, that
the economy should respond in a more flexible and rapid way to demand.”
She went on to say that while France is exiting the crisis, “the
consequences of the crisis have not yet been erased.” She said there is
“way too much unemployment,” and the effects of financial market
turbulence are still causing problems.
“All of our action is clearly to restart growth so the economy
functions, so that it creates jobs, so that companies are competitive —
because that is the first battle we need to win for the country,”
Lagarde said.
She reiterated France’s commitment to reduce its budget deficits
and outstanding public debt. This needs to be done both by increasing
tax revenue and cutting public spending, she said. But she reiterated
that, in line with the marching orders from President Nicolas Sarkozy,
there will not be any general tax increases. Rather efforts will focus
on tax collection, largely by ending many tax breaks.
“We have already reduced tax breaks by about 10 billion euros, and
as [Budget Minister] Francois [Baroin] has said, we will need to go a
little further,” Lagarde said. “But I think it is also extremely
important to reduce public expenditures.”
Lagarde also noted that the publication of France’s December
inflation data later this week will determine whether remuneration on
popular “Livret A” savings accounts will rise. If inflation, excluding
tobacco, is at 1.6%, the rate on Livret A will remain at 1.75%, its
legal minimum, she said. “If, on the other hand, inflation rises to
1.7%, Livret A [remuneration] will be lifted to 2%.”
–Paris newsroom, +331-42-71-55-40; bwolfson@marketnews.com
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