| France may miss deficit target over slow growth |
PARIS The European Commission sees France missing its target of cutting its public deficit to 3 per cent of output next year because of slower-than-expected growth, throwing a deficit-cutting trajectory into doubt.
The EU’s executive arm saw economic growth in France of just 0.4 per cent next year, half the 0.8 per cent level on which the government’s 2013 budget is based.
In its autumn forecast, the Commission said that France’s budget deficit would fall to 3.5 per cent of gross domestic product next year, above the EU target, and would only drop below 3 per cent in 2014.
“After three quarters of stagnating GDP and historically low levels of corporate profitability, prospects for an imminent recovery have waned,” the report said. “Specific downward risks relating to the French economy weigh on the potential recovery.”
The forecast matches International Monetary Fund estimates for growth and deficit reduction and is slightly more optimistic on GDP than a Reuters poll of economists, which predicts growth 0.3 per cent next year.
France’s 2012 deficit is seen around 4.5 per cent of output.
The Commission’s forecasts chime with the views of many economists who believe Socialist President Francois Hollande has based his budget on over-optimistic growth targets as the country struggles to rebound from three quarters of stalled output.
In September, Hollande unveiled France’s toughest budget in 30 years, relying on a combination of hefty tax hikes for companies and the wealthy and checks on public spending to bring the deficit down by 30 billion euros.
Reuters
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