Hollande under fire from EU over debt and deficit

European finance ministers sent floundering French president François Hollande a firm message that he must keep to his commitments to get both debt and deficit down as agreed.

This was the third piece of bad news for the Socialist leader in as many days, after the left was trounced in local elections and the latest figures show debt and deficit rising rather than falling.

Debt in the eurozone’s second-largest economy has climbed to a record 93.5% from 90.6% last year, while the deficit is 4.3% of GDP. While this is down from 4.9% in 2012, it is higher than the hoped for 4.1%.

While he can probably get the deficit down to the required 3% by 2015 — following a two-year extension — the debt is causing problems and France is arguing that the money given to the EU funds to help troubled economies and banks should be excluded from the debt.

Hollande, introducing his new prime minister, Manuel Valls, said he will “have to convince Europe that this contribution by France to competitiveness and growth must be taken into account”.

The Finance Ministry says that without these contributions the €1,925bn debt would be down slightly to 90.4% — a reduction on the figure for 2012.

However following the two day informal meeting of finance ministers, without the French finance minister being present, an EU source said: “He spent two years trying to placate the different groups in his party instead of tackling the problems. He cannot be afraid of annoying the citizens now — they are already cross with him.”

President of the eurozone, Jeroen Dijsselbloem, was equally unforgiving: “We need to continue working on the stabilisation of budgets and at the same time become more competitive. That requires more reforms, also in France.”

President Hollande jettisoned his finance minister and former campaign manager Moscovici in favour of Michel Sapin, fresh from making some of the reforms demanded by the EU in the Labour Ministry.

The French Ministry of Budget in a statement said that they managed to cut public spending by 2.5 percentage points but revenues were down by 1.5 percentage points. Cuts by Paris were cancelled out by increases in the spending of local administrations.