France declares the end of austerity

The Hollande administration will not impose more cuts to reduce the deficit

French president Francois Hollande (GETTY IMAGES)

The French government has launched a clear challenge to Brussels and Berlin over the economic management of the eurozone, after it declared the end of austerity.

Francois Hollande’s government said it would not impose more cuts to reduce France’s budget deficit below 3 per cent by next year, as mandated by pan-European Union rules.

Previously, France had promised its European partners that it would bring its deficit below 3 per cent by next year, a deadline that had already been extended from 2013.

But under today’s budget plan, the deficit is projected to fall from 4.4 per cent of output this year to 4.3 per cent next year and 3.8 per cent in 2016. It will not dip below 3 per cent until 2017.

A new round of snapshots of manufacturing activity in the eurozone showed continued weakness in September.

The overall index was just in positive territory at 50.3, but that was no improvement on August and was a 14-month low. Activity contracted in Germany and France, according to surveys of purchasing managers by Markit.