France To Cut Spending – Shinsei Associates.
Shinsei Associates – France unveils its second budget cut in two months in a bid to protect its credit rating.
Shinsei Associates expects the French government of President Nicolas Sarkozy to announce new austerity measures, aiming to meet the targets it set for the reduction of its deficit in a bid to retain its coveted triple-A rating.
The package that will be unveiled will be a mix of spending cuts and tax hikes, with a greater focus on reduced spending compared to the previous budget cut, which focused more on ways to boost revenues.
Shinsei Associates expects the measures to raise as much as 8 billion euro, which follows the previous 12 billion euro freed up from the previous austerity budget just over two months ago. France, a country with a notoriously vocal population, has seen an angry reaction to the cutbacks with strikes and public demonstrations.
There had been suggestions from some ratings agencies that there could be a cut in France’s coveted triple-A credit rating due to a combination of slow economic growth and France’s share of the EU emergency bailout fund. In order to hang on to the prized top rating, President Sarkozy wants to see a cut in the deficit from 5.7 percent of GDP down to 4.5 percent.
Mr. Sarkozy is taking a significant gamble with these measures with a new presidential election on the horizon. Shinsei Associates believes that the French people may this time do their protesting in the ballot box instead of in the street.
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