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Security first, not budget rules, says France

Tuesday, November 17, 2015 - 01:37

France's Prime Minister has warned the country will almost certainly overshoot its European Union budget deficit target as it boosts security spending in the wake of the November 13 Paris attacks. David Pollard reports.

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With militant attacks on the rise, so too is the bill for them - France amending its budget to hire 10,000 more police and gendarmes. That could mean overshooting EU deficit targets, says prime minister Manuel Valls. But so be it. (SOUNDBITE) (French) FRENCH PRIME MINISTER, MANUEL VALLS, SAYING: "It is now time for the European Union, for the Commission to understand today that it is France's fight but also Europe's." Italy and Spain are among others at risk of breaking EU rules next year. France's needs, though, are clearly the most obvious, says CMC Markets' Michael Hewson. (SOUNDBITE) (English) MICHAEL HEWSON, MARKET ANALYST, CMC MARKETS, SAYING: "Spending and deficit rules really need to go out of the window, or need to be suspended. Ultimately the French government's main responsibility is the safety and security of its local population." France had enjoyed something of a rebound in its services sector - but consumer confidence now looks very vulnerable. That's in the short term. In the longer-term, a state of emergency declared by president Francois Hollande could hinder growth. It's already dragging on travel and hotel stocks. And puts an expected policy easing from the ECB squarely in focus. (SOUNDBITE) (English) MICHAEL HEWSON, MARKET ANALYST, CMC MARKETS, SAYING: "This concern ... is not confined to France. I think Germany is likely to be at risk, as is the rest of Europe. So that's why what the ECB does over the course of the next two or three weeks could be quite important in that context." And what the Fed does - it now seen by some as less likely to hike next month - as it factors in yet another layer of risk to the global outlook.

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Security first, not budget rules, says France

Tuesday, November 17, 2015 - 01:37