France’s Economy Picks Up Speed

The French state cut its annual budget deficit last year more than expected to reach the smallest shortfall between spending and revenues since 2008, the budget ministry said on Tuesday.

The deficit came to €67.8 billion ($82.99 billion) last year, marking an improvement of €1.3 billion from 2016, the ministry said, Reuters reported.

It was also better than the €69.3 billion originally budgeted by the previous Socialist government. A November update of the annual budget by the current government had foreseen a state deficit of €74.1 billion.

The better-than-expected result came thanks to strong value added sales tax and corporate tax as the economy picked up speed in the second half of the year, while government spending was kept in check, the ministry said.

The result raises the chances that France kept its overall public sector deficit within an EU limit of 3% of economic output, the ministry said.

France has not had an overall public deficit—which includes local authorities and welfare administrations in addition to the state—in line with the EU limit since 2007. The figures for 2017 will not be published until the end of March.

Economic Transformation

French Economy Minister Bruno Le Maire on Monday presented an upbeat view of France's economic performance this year, but stressed that risks at home and abroad may taint the expected positive note, Xinhua reported.

"In 2017, we laid the foundation for the economic transformation... On this basis, we can confidently start the year 2018," Le Maire said in Paris.

Struggling to put growth back on track, France expected to expand growth by about 2% for the whole year of 2017. As to this year, the figure is likely to be revised up from the initial forecast of 1.7%, according to Le Maire.

In his address, the minister also pointed to persistent high jobless claims and mounting nationalism which may cloud the country's outlook.

Currently, unemployment rate in France stands at 9.4%. The government targets to lower the figure to 7% by 2022 mainly by pouring €15 billion ($18.4 billion) over the period to train poor-skilled jobless youth.

"We will also continue to protect the French. I believe in a state that helps the development of our economy, a state that creates a favorable environment for entrepreneurs, a state that protects and defends our national interests," said the minister.

In this context, France is working to improve its attractiveness while protecting its strategic businesses including digital data storage and artificial intelligence, the minister said.

No Time to Waste

Le Maire said a new global economic order will emerge over the next five years, and both France and the eurozone must reform urgently to meet that challenge, Bloomberg reported.

In a wide-ranging speech of almost an hour, Le Maire sought to flesh out the broad lines President Emmanuel Macron’s economic thinking: The administration is seeking to strengthen the French economy by increasing its flexibility while pushing the European Union to defend its economic sovereignty in the face of US and China.

“We need to be clear that the international landscape is changing at a stupefying pace and is leading to deep changes in the balance of power and the economic game,” Le Maire said. “Given this great turning point, the conclusion is simple: there is not a moment to waste in accelerating the economic transformation of France and the transformation of the eurozone.”

Repeating a line he first proffered last week in China, Le Maire said he sees no contradiction in making France an “open” economy while the government works to prevent the nation being “pillaged” by outside interests.

Le Maire also outlined some plans to introduce this year, saying that he wants to help companies grow in size and promote profit sharing with workers. He said he plans to break France’s attachment to increasing the regulatory burden on companies once they exceed a certain a number of employees—economists said that such features of French regulation deter companies from hiring.

“The great risk today is that human connections are undermined as a result of the increase in inequality and short-term selfishness,” Le Maire said. “Once you recognize this risk, you want to resist it. I will make this commitment the hallmark of our ministry in 2018.”