France needs long-term spending rule to restore finances – OECD

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French Minister of Economy and Finance Bruno Le Maire attends a press conference to present the 2022 budget of the French government to the Ministry of Finance of Bercy in Paris, France, September 22, 2021. REUTERS / Gonzalo Fuentes

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PARIS, Nov. 18 (Reuters) – France needs a multi-year spending rule to bring its post-COVID public finances under control, the Organization for Economic Co-operation and Development said on Thursday, raising its growth forecasts.

The recovery of the eurozone’s second-largest economy has exceeded most expectations this year as consumer spending rebounded following a mass vaccination campaign.

Growth is now expected to reach 6.8% this year and 4.2% in 2022, the OECD said in an in-depth report on the French economy. He previously had a pencil forecast of 6.3% this year and 4.0% next year.

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The government’s economic support measures during the crisis have left public finances under strain and indebtedness at record levels, just as France is planning major investments to decarbonize the economy and face rising costs the aging of the population.

With public spending already among the highest in the world at nearly 60% of GDP, the OECD said France needed a multi-year spending rule, which it said had a positive track record in reducing spending. deficits in other high spending countries like Sweden.

He said this would force the government to rationalize spending with in-depth reviews to ensure the money is well spent, which the OECD says is not always the case given the myriad of agencies. audiences at different levels.

While Finance Minister Bruno Le Maire has supported a multi-year spending rule and even enshrined it in the constitution, President Emmanuel Macron has not yet spoken for or against.

The OECD also said the French pension system was too fragmented and spending too high. Macron put reform plans aside for the time being last week with a presidential election looming next April. Read more

As France, like many European countries, lags behind its CO2 reduction targets, the OECD has said it must not only boost green investments, but also phase out tax breaks that polluters enjoy and increase taxes that are more respectful of the environment.

Macron removed a carbon tax in 2018 after helping spark waves of the most violent street protests in decades and spark a larger anti-elite movement named after the highly visible yellow vests the protesters wore .

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Reporting by Leigh Thomas; Editing by Toby Chopra

Our Standards: Thomson Reuters Trust Principles.


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