Skip to comments.France to write balanced budget into constitution
Posted on 02/03/2011 1:31:39 AM PST by bruinbirdman
France said on Wednesday it would reform its constitution to include a "golden rule" on balancing the budget, following the example of Germany which already has its own constitutional limit on deficits. Government spokesman Francois Baroin, who is also France's budget minister, said the constitutional reform would be presented to parliament in the coming weeks and would set a date for France -- where generous welfare provisions have led to a perennial deficit -- to achieve a fiscal balance.
President Nicolas Sarkozy's government, which has said it wants closer fiscal coordination with Germany, has been seeking a mechanism to tackle France's large structural deficit, but analysts said getting the constitutional change approved could prove a challenge for his government ahead of 2012 elections.
"This is a reshaping of our constitution which will fix a clear objective of budgetary equilibrium and will set the means of achieving it," Baroin told journalists after a cabinet meeting, without providing further specifics.
EU paymaster Germany passed legislation in 2009 to set a limit on the federal government's structural deficit, taking into account the economic cycle.
It is now pushing its euro zone partners to take similar steps as part of a comprehensive anti-crisis package for the bloc which is expected to be unveiled at an EU summit in late March.
TOUGH ROAD AHEAD
In order to be enacted, the constitutional change will either have to be approved by a referendum or by a three-fifths majority in parliament -- a considerable challenge for Sarkozy's centre-right government as it heads into an election year.
"I'm afraid there will be quite a few difficulties," said Mariette Sineau, a political scientist at the CEVIPOF research institute. "Even within the UMP (ruling party) there are some old Gaullists who will find fault with such budget orthodoxy."
The response on the left would be unanimous, she added. "Among the Socialists, I think they will vote against en masse." The UMP has a majority in the National Assembly, but must appeal to centrists in the Senate to rally votes.
Baroin said conversations had been taking place in recent weeks among European Union partners on an EU directive setting the requirements for the budgetary frameworks of member states.
The German "debt brake" rule caps new federal borrowing at 0.35 percent of gross domestic product (GDP) from 2016, forcing Berlin to reduce its structural deficit by roughly 10 billion euros a year over the coming half-decade.
Sarkozy set up a commission of experts a year ago to explore introducing such a rule in France, but the commission stopped short of advocating a German-style debt rule amid strong opposition from parliamentarians, including in Sarkozy's UMP.
Sarkozy did say in May, however, that he wanted French governments to set out five-year plans to tackle the deficit as part of a constitutional reform. Baroin said the constitutional change would allow the establishment of framework laws for longer term fiscal planning and the setting of rules on how parliament will be consulted on France's budget plans which are submitted to EU authorities under the bloc's Stability and Growth Pact.
France aims to cut its fiscal deficit to 6.0 percent of GDP this year, from an estimated 7.7 percent of GDP in 2010, as part of its efforts to reach an EU deficit ceiling of 3 percent of GDP by 2013.
A country too cowardly to go to war can have the luxury of such a policy. As usual, we’ll pick up the surrender monkeys slack.
Which version of their constitution would this be — 21st?
Every country should be constitutionally restricted from running up a deficit, unless it is in a declared state of war. I admire the French for what they are doing and wish we would do the same...
If austerity measures and rate hikes are widely adopted across the EU, the Fed is going to have to raise rates to keep treasuries even remotely attractive in the bond market. The combination of high interest rates and lack of monetary discipline is going to destroy our economy.
All countries that are in unsustainable debt should default, take their lumps for doing so, and then go on a gold standard to induce monetary discipline so that this does not happen again...
Does that include the present value of unfunded liabilities like government employee pensions and social securiy benefits?
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