Bond-buying seen by some as victory for Hollande

 

FRANCE HAS hailed the European Central Bank’s new bond-buying programme as a vital step in efforts to contain the euro zone debt crisis, with one ally of François Hollande describing the plan as a triumph for the French president.

Mr Hollande, who had publicly pressed the ECB to act decisively to ease the borrowing costs of Spain and Italy, said the bank had acted in line with its mandate to “safeguard growth in Europe”.

His finance minister, Pierre Moscovici, also saluted the move, saying he welcomed the vision set out by ECB chief Mario Draghi, adding it was now up to member states to “support that vision”.

Members of the president’s majority sought to present the ECB’s intervention as vindication of Mr Hollande’s positions.

Bruno Le Roux, head of the Socialist Party in the lower house, said the bank’s decision was “a clear victory for François Hollande” and a “death certificate” for the “Merkozy” alliance of his predecessor Nicolas Sarkozy and German chancellor Angela Merkel.

“The decision proves that with François Hollande as president austerity is no longer the impassable horizon proposed to the people of Europe, and that the reign of liberal orthodoxy is coming to an end.”

With his approval ratings waning, Mr Hollande is keen to keep public opinion behind him as he prepares for a tough autumn budget. Speaking at the state auditor’s office yesterday, the president said he would cut spending by €10 billion next year and was determined to bring the deficit down to 3 per cent of GDP by the end of 2013, from 5.2 per cent last year.

“It will be the most significant budgetary effort in 30 years,” he said. While France’s borrowing costs are at record lows, he said reducing the deficit was vital to keep bond yields at a manageable level and to “retrieve breathing space” in the future.

The €10 billion spending cuts will be part of a larger package of €33 billion in savings due to be announced in the budget at the end of the month.

“What people expect from us is credibility and that is what we will deliver,” Mr Moscovici said. “That is why we must reach the budget deficit goals we have set. It is essential for our credibility.”

Amid reports that the government was preparing to water down a pledge to tax at 75 per cent those earning over €1 million a year, labour minister Michel Sapin insisted the measure would go ahead but some nuances would be introduced.

He said while the threshold of the tax would be €1 million for single people, it would be higher for couples.

Referring to reports in Le Figaro that artists and sportsmen could be exempt, Mr Sapin said the tax would be based on average earnings over a long period so those receiving a temporary spike in their earnings would not be hit.