France And West Plan For Fiscal Tightening

It is the general idea of the eurozone to deal with the European debt crisis by first helping the member states' finances and helping the highly indebted countries.

According to reports, France, Spain and Italy and other euro zone heavyweight member countries have also entered the fiscal tightening camp: France will promise to cut spending 14 billion euros in 2011 and 2012; Salgado, the Spanish finance minister, said on 24, the country will announce the latest fiscal tightening measures on 26, and will complete the constitution amendment before November 20th to write the deficit cap into the constitution.

It is also reported that Finland and other countries require Greece to provide assistance loans.

France West means tightening the belt.

According to reports, the French government plans to cut its budget expenditure by 4 billion euros in 2011, and further cut 10 billion euros in 2012.

The goal of fiscal tightening is to reduce the ratio of budget deficit to gross domestic product (GDP) from 7.1% last year to 5.7% this year, to 4.6% in 2012, and to 3% in 2013.

The International Monetary Fund (IMF) predicts that in 2013, the share of public debt in France will increase from 81.7% in 2010 to about 90% in 2013.

At present, the proportion of French debt to GDP is close to that of the US rating.

Bagbe, a Bank economist in Paris, France, predicts that as long as the French economy maintains a growth rate of 1.8% to 2%, the goal of deficit reduction is feasible.

According to Italy's fiscal tightening plan, the country will cut its spending by 20 billion euros and 25 billion 500 million euros in 2012 and 2013 respectively, reducing the deficit to GDP ratio in 2012 to 1.4%, and achieving a budget balance in 2013.

Specific measures include increasing taxes on high income groups, revoking some local administrative organs, reducing public holidays and raising retirement age.

This is the second time in two months that Italy has introduced a fiscal tightening plan.

Pilenka, an economist at Societe Generale (601166, stock bar), said severe financial austerity has brought a significant downward risk to Italy's economic growth, which may "weaken the growth of government revenue and, in turn, undermine ongoing fiscal consolidation".

In addition, it also alleviated the debt burden.

Help Greece's donor countries want to "turn around"

Greece reached a bilateral agreement with Finland last week. Greece will pay about 500 million euros of cash to Finland as collateral for the latter's loan assistance.

Aid donors from Austria, Holland and Slovakia later asked Greece to provide mortgages.

The agreement was opposed by many countries in the euro area. German Chancellor Merkel said 23 days that Germany opposes Finland's acceptance of Greek collateral, which could threaten Germany's "priority creditor" status.

Finland's prime minister Katenin said on the same day that Finland may adjust the agreement on salvage collateral, but if the mortgage request is refused, Finland may withdraw from the aid action.

Analysts pointed out that the loan crisis of aid to Greece is a major threat to the debt crisis mechanism in the euro area, which may force the operation of Greece to be postponed or even cancelled. Once so, the debt risk of the recipient countries will rise sharply, and the situation of "Redemption" in default will also deepen the euro area's political rift and make the euro currency system in turmoil.

To this end, Greenspan said that because of the political, consumption and inflation issues, the euro area is "disintegrating" between the 17 countries, and the collapse of the euro zone may inhibit the growth of the US economy.

Greenspan said that given the tight economic ties, the uncertainty brought by the European debt crisis has become one of the important factors that drag the US economic recovery. The euro zone government's spending cuts, consumer spending cuts and corporate recruitment will exacerbate the US economic downturn.