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Sarkozy Plans New Wave Of Austerity Measures

August 2011 - Finance. Legal Developments by Hassans.

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It seems no nation is safe in Europe from the scrutiny of the increasingly skittish bond market, as even France, with its credentials as Europe's second largest economy and with comparatively modest debt, has been forced to address its fiscal shortcomings.

Following an emergency meeting of the country's top ministers, which cut short the President's holiday, Finance Minister, Francois Baroin said that rumours of instability in France's banking sector are unfounded, and that the government would take the necessary steps to implement austerity measures rapidly to calm markets' concern over France's ability to meet fiscal targets and avoid the downgrading of its triple-A credit rating.

His announcement came after growth figures for the second quarter showed stagnant growth in the French economy, compounded by the earlier dramatic fall in the share price of Societe General on rumours of significant exposure to bad debt. The price largely recovered later after trading had been temporarily suspended.

The market's major concern, both in relation to France and the Eurozone in general, is whether France's fiscal targets are still achievable given falling consumption and economic growth. The nation's fiscal plans rely on growth of 2.5% for the full year, ambitious according to the International Monetary Fund, and unachievable unless the economy picks up significantly in the final two quarters.

French President Nicolas Sarkozy has called for French political parties to club together to achieve an austerity plan in coming days. It is anticipated that among this raft of measures, the French government will consider reining in tax breaks to provide immediate tangible evidence of consolidation.

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