October 23, 2012 / 6:08 PM / 8 years ago

French budget lacking in spending cuts: ECB's Noyer

Bank of France Governor Christian Noyer addresses the International Economic Forum of the Americas in Montreal, Quebec June 11, 2012. REUTERS/Christinne Muschi

PARIS (Reuters) - French central bank Governor Christian Noyer voiced regret in a newspaper interview published on Tuesday that the country’s 2013 budget did not focus more on cutting public spending.

President Francois Hollande delivered France’s toughest budget in 30 years last month, counting on 20 billion euros ($26 billion) in tax hikes for firms and the wealthy to keep his deficit targets in reach.

However, the budget, which is currently working its way through parliament, stopped short of making cuts to spending, and instead focused on keep expenditure growth in check.

“Personally, I regret that it wasn’t possible to put more of the burden on spending cuts because they are less harmful to growth than tax increases,” Noyer told 20 Minutes newspaper.

“That said, in the very short term, taxes are the fastest way to efficiently reduce deficits,” Noyer, who is an ECB governing council member, added.

The 2013 budget aims to keep France on track to cut its public deficit to 3 percent of gross domestic product next year from an estimated 4.5 percent this year.

With France’s 2-trillion-euro economy flagging, Hollande is facing calls even from within his own Socialist camp to adopt an easier deficit target.

Noyer said the government was right to stick to the 3 percent target and that its growth forecast of 0.8 percent for next year was not out of reach.

“It’s not in the average of economic forecasts between 0.3 and 0.9 percent, but that scenario is not improbable and will depend on reforms being carried out and confidence returning in Europe,” Noyer said. ($1 = 0.7714 euros)

Reporting by Leigh Thomas; Editing by Ruth Pitchford

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