France finds 3.6 billion euros savings in bid to calm EU budget deficit row

The French government says it has found extra savings of 3.6 billion euros after coming under fire from the European Commission for announcing that it would not reach EU deficit targets on time.

Finance Minister Michel Sapin (L) with Economy Minister Emmanuel Macron (C) and Environment Minister Ségolène Royal Reuters/Charles Platiau

French Finance Minister Michel Sapin on Monday announced "new measures" and "clarifications" on the government’s budget that will reduce the deficit by an additional 3.6 billion euros.

The savings come from:

• A drop in interest rates that has brought down the cost of financing the country's debt by 400 million euros;
• Lower contributions to the EU budget, expected to save 300-600 million euros;
• Scrapping some corporate tax allowances, saving 500 million euros;
• Fighting tax fraud, expected to bring in 900 million euros.

France this month announced that next year's deficit will be 4.3 per cent of annual

economic output, above the EU’s 3.0 per cent ceiling, leading Economic Affairs Commissioner Jyrki Katainen to send a letter to Paris demanding explanations

In a letter back to the commission, Sapin said France would stay with the "two pillars" of its economic strategy, a 40-billion-euro package of tax breaks for businesses that is hoped to create jobs and 50 billion euros in public spending cuts over three years.

The letter says that France is “in line with the common rules” of the EU, which have some flexibility.

Brussels was expected to publish its response to the new measures on Wednesday