AIX-EN-PROVENCE, France -(Dow Jones)- France hasn't made a choice between austerity and stimulus, French finance minister Christine Lagarde said Sunday, describing the French economic policy as a mix of spending cuts and measures aimed at boosting demand.
"There is no choice between austerity and stimulus," Lagarde said at an economic conference in Aix-en Provence, southern France. "Our policy is a subtle mix between growth-friendly spending cuts and letting play out the remainder of our stimulus package," she said.
The French government has committed to reducing the public deficit as a percentage of gross domestic product from a projected 8% this year to 3% in 2013, and to this end has said it will freeze state spending for three years and cut operating costs 10% by 2013.
The aim is to generate EUR100 billion of savings by 2013, half of which will come from spending cuts and the closure of tax loopholes, and the other half from an increase in tax receipts due to the return of growth, according to the French government plan.
Lagarde said that banks' capital buffers must be increased and their quality improved in order to prevent future crises, but she warned that this shouldn't be done at the expense of credit growth. She said France favors instituting a tax on banks to reduce risk over a capital surcharge, adding that such a tax should target banks riskiest activities.
- By Nathalie Boschat, Geraldine Amiel and Adam Mitchell, Dow Jones Newswires; +33 (0) 1 40 17 17 45; nathalie.boschat@dowjones.com
Copyright 2009 Dow Jones Newswires
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