Last week, Michel Sapin, France’s finance minister, disclosed new pledges to narrow the structural deficit. It showed that France has targeted lower structural budget cuts than those requested by Brussels, which puts France at odds with Brussels.
- Latest budget shows that France is pledging to reduce structural deficit by 0.5% of GDP in 2016 and 2017, compared to 0.8% and 0.9% reduction, requested by European Commissions.
- Last month’s European Commissions’ granting France additional 2 years to balance its budget registered wide spread anger among other European partners over preferential treatment. France need to bring deficit within Brussels target of 3% by 2017, as per new guideline.
France is Europe’s second largest economy after Germany, however it sets poor example of austerity and economic prowess.
- France’s is forecasting a deficit of 3.8% of GDP this year and is targeting to reduce the ratio by bolstering growth in the region.
- European Central Bank’s (ECB) policy easing has made France hopeful of growth and recovery, which so far lagged in the country. France is a clear example where ECB’s policy measures are reducing incentives to move with austerity.
France will keep lagging many European counterparts.
- Over the coming months, growth in France will keep lagging compared to Germany, Spain and Ireland.
- Moreover structural deficit is not reduced will keep haunting back at time of slower growth or recession.
One good trade could be to short French long end bonds against German and Irish equivalents.
The material has been provided by InstaForex Company – www.instaforex.com