Updated stability programme of France, 2005-2009 - Main contents

EN

Official Journal of the European Union

C 82/14

On 14 March 2006 the Council examined the updated stability programme of France, which covers the period 2005 to 2009.

French GDP growth was over the last 10 years close to the euro-area average at 2,3 %. Since 1998 it was about half a percentage point higher, sustained by relatively buoyant domestic demand. Despite the relatively good performance over this period, the employment rate increased only slightly and the unemployment rate remained high, although it recently diminished, from 10,2 % in March 2005 to 9,5 % in January 2006. Following a record deficit level of 6 % of GDP in 1993, the budgetary situation improved and the 3 % of GDP Treaty reference value was respected from 1997 onwards. However, the reference value was breached again from 2002 onwards as the budgetary situation deteriorated, which was partly due to the slowdown in growth. Since 2004, the deficit ratio has been declining.

On 3 June 2003, the Council decided that France was in excessive deficit and recommended based on Article 104(7) that the excessive deficit be corrected by 2004. In its Communication to the Council of December 2004 on ‘the situation of Germany and France in relation to their obligations under the excessive deficit procedure following the judgement of the Court of Justice’, the Commission concluded that 2005 should be considered as the relevant deadline for the correction. In January 2005, the Council concurred with this view. In its opinion of 17 February 2005 on the December 2004 update of the stability programme, covering the period 2004-2008, the Council invited France to do the necessary to ensure the correction of the excessive deficit in 2005 and the continued budgetary consolidation thereafter and to implement structural reforms and control expenditure in order to secure the respect of the multi-annual expenditure targets.

As regards budgetary implementation in 2005, the general government deficit was estimated at 3,2 % of GDP in the Commission services' autumn 2005 forecast, against a target of 2,9 % of GDP set in the previous update and 3 % of GDP in this update. Despite less favourable macroeconomic conditions compared to the previous programme, recent partial information suggests that the deficit in 2005 is likely to have been reduced to around 3 % of GDP notably thanks to better control of public expenditure, a strong performance of non-fiscal receipts and taxes based on asset prices, and additional revenues in end-December linked to a change in the corporate tax legislation. It should also be noted that the deficit reduction in 2005 included substantial one-offs.

The programme broadly follows the model structure and data provision requirements for stability and convergence programmes specified in the new code of conduct (2). The update was submitted 6 weeks beyond the 1 December deadline set in the code of conduct, reflecting the authorities' wish to incorporate some of the ‘Pébereau report’ (3) proposals for debt-reduction in their intensified debt-reduction strategy.

The programme contains two different scenarios for the macroeconomic and budgetary projections: a ‘low growth’ scenario...