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For Once, OECD Not Recommending Austerity For France

Translated Saturday 23 March 2013, by Gene Zbikowski

On March 19, the Organization for Economic Cooperation and Development (OECD) forecast weaker growth for France in 2013 (0.1% instead of 0.3%) but it is not recommending that the government adopt new austerity measures.

"It is appropriate to let the automatic stabilizing mechanisms play freely,” with high social expenditures due to the steep rise in unemployment and low tax revenues due to morose economic activity, “at the price of higher public deficits than were envisaged,” say the authors of this report on France.

Free trade dogmas remain in place

For all that, the OECD isn’t giving up on its dogmas. “It is however necessary to remain vigilant as to the repercussions that the increased budget might have” on “the credibility of the budgetary policy,” the OECD warns. According to the OECD, the continuation of structural reforms “would make it possible to minimize the risks.” “The political calendar offers a unique opportunity to apply an ambitious reform strategy allowing growth in efficiency and a reduction in the cost of public policies,” the rich countries’ club insists. The recent measures to increase competitiveness and to transform the labor market “are encouraging signals” in its eyes.

Rising deficits

According to the OECD forecast for 2013:

Growth should be lower than forecast: 0.1% instead of the 0.3% calculated in a previous estimate.

The French economy should grow by 1.3% next year.

Unemployment should continue to rise in the course of the coming months and then “be stabilized late in 2013” at around 11.25%. The OECD forecasts an average unemployment rate of 11% among the working population this year, and 11.2% in 2014.

The public deficit will hit 3.5% of gross domestic product (GDP) this year and should only drop to 3%, the highest level authorized by the European Union treaties, in 2014, a year later than had been promised by France.

The sovereign debt will continue to rise, from 91.3% of GDP in 2012 to 96.1% in 2014, according to the OECD. The French government had been hoping to get it down beginning next year, but will revise its forecasts by mid-April.

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