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French report French report
by Euro Reporter
2012-01-15 10:19:47
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France to pursue reforms after downgrade

France's prime minister said Saturday his country will push ahead with cost-cutting measures after its top-tier debt rating was downgraded, a blow with repercussions across financially beleaguered Europe. Other European countries from Austria to Cyprus assailed ratings agency Standard & Poor's after a raft of downgrades Friday night that renewed questions about the power such agencies wield. The move may make it more expensive for struggling countries to borrow money, reduce debts and avoid a new recession.

German Chancellor Angela Merkel said downgrades of nine eurozone countries underline the fact that Europe has a "long road" ahead to win back investors' confidence. Her own country, the engine of Europe's economy, was not downgraded. Merkel and French Prime Minister Francois Fillon said the downgrades should push European countries to quickly implement a planned pact to strengthen budget discipline. Germany and France have piloted rescue efforts for other eurozone countries as the continent has been swept up in crisis after crisis over the past two years.

Fillon struck a sombre, measured tone when responding Saturday to the downgrade, which was particularly wounding to France's self-image and could hurt bailout efforts. France is central to those efforts, and the downgrade, by pushing up its own borrowing costs, could make it harder for France to help others. Fillon said the downgrade confirmed his conservative government's plans for more reforms to bring down debts, despite worries that more austerity measures could suffocate growth. He said the government wouldn't adjust the budget yet, saying it had been devised with an assumption of higher borrowing costs. S&P had warned 15 European nations in December that they were at risk for a downgrade. The downgrade, three months before France holds presidential elections, was "an alert that should not be dramatized any more than it should be underestimated," he said.


France eyes all securities with Tobin tax

France wants to target bonds and derivatives, as well as stocks, with a new tax on financial transactions which the conservative government hopes to introduce before an April presidential election, Finance Minister Francois Baroin said on Tuesday. President Nicolas Sarkozy's government is keen to push ahead with a "Tobin tax" even without its European Union partners, but the daily Le Monde reported on Monday that such a tax could be limited to the purchase of shares. "We want it to be broad -- stocks, bonds and derivatives," Baroin said. "We want, along with Germany, to put it into place, if possible at European Union level, otherwise in the euro zone, under the swiftest possible timetable, which for France means putting it into place in 2012," he added, a day after Sarkozy discussed the idea with his German counterpart Angela Merkel.

Baroin said a bill should be ready in February and that he would go to Berlin on Thursday to work on the details of the tax and the timeline for putting it in place. "What I can tell you is that France will be the first country to put this financial transaction tax in place this year," Baroin said later in a question and answer session at parliament. Michael Meister, a senior lawmaker from Merkel's Christian Democrats said on Tuesday the party will push for a transaction tax in Europe even though her junior coalition partners oppose the levy. "It will happen," Meister said.

The tax measure is one of a flurry of ideas unveiled by the energetic Sarkozy since the New Year started, including plans to improve labour market flexibility and to raise sales taxes to ease the burden on companies of financing the welfare state. Sarkozy has long been an advocate of the so-called "Tobin tax," pushing for it at Group of 20 levels during France's presidency of the economic grouping last year, but had thus far sought to implement it at pan-European level at the least. "Evidently France should do it along with others. But, my dear compatriots, if France waits for the others to decide to tax finance, finance will never be taxed," Sarkozy said in a New Year's speech in the eastern city of Mulhouse. "France will not just talk about it, France will do it." Le Monde had quoted an unnamed government minister as saying the new tax would be limited to reinstating a stock exchange tax that was abolished in 2008. That could indicate that a French Tobin tax might be created in two stages.


The Legion of Honour award to Suu Kyi

French President Nicolas Sarkozy’s office says he has decided to give France’s highest award — the Legion of Honour — to Myanmar opposition leader Aung San Suu Kyi. Sarkozy’s office said he spoke with Suu Kyi by phone. He praised the Myanmar government’s release of hundreds of detainees on Friday, including some of the country’s famous political prisoners.

Sarkozy hailed Suu Kyi’s “political courage” and expressed support for the Myanmar junta’s recent reforms. He also said France expects that legislative elections planned April 1 in Myanmar will be free and transparent. French Foreign Minister Alain Juppe will be charged with giving Suu Kyi the Legion of Honour award during his trip to Myanmar on Sunday and Monday.

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