France to stick within EU deficit limits in 2005

5th September 2005, Comments 0 comments

PARIS, Sept 5 (AFP) - France has told the European Commission that its public deficit in 2005 is expected to be 3.0 percent of output, in line with EU limits but exceeding an earlier target of 2.9 percent, the economy ministry said on Monday.

PARIS, Sept 5 (AFP) - France has told the European Commission that its public deficit in 2005 is expected to be 3.0 percent of output, in line with EU limits but exceeding an earlier target of 2.9 percent, the economy ministry said on Monday.

If achieved, this year will be the first time since 2001 that France has respected EU rules on public spending that require governments in the EU and eurozone to keep deficits within a ceiling of three percent of gross domestic product.

In 2004, the public deficit was 3.7 percent of GDP, or EUR 59.8bn and reached 4.2 percent in 2003, or EUR 65.8bn.

"In line with the normal timetable, the government informed the European Commission of its public deficit for 2005 today," the economy ministry said in a statement. "The forecast for the public deficit in 2005 is for 3.0 percent of gross domestic product."

French Prime Minister Dominique de Villepin, questioned in a radio-television interview on Sunday about a commitment by the government to reduce the deficit this year to less than 3.0 percent of output, had said: "It is a commitment that we confirm."

Until now the government has spoken of a target of 2.9 percent.

The public deficit, as defined under the Maastricht Treaty that created the single currency, covers the excess of spending over revenue with regard to the central government budget, social welfare budgets, which in France far exceed the government budget, and local authority budgets.

France has had what the European Commission terms an 'excessive deficit' -- one that exceeds the 3 percent of GDP barrier -- for the last three years.

A decision by the EU executive to try to impose sanctions against the French government for its fiscal indiscipline sparked a row and ultimately led to a renegotiation of the rulebook, known as the Stability and Growth Pact.

The French Prime Minister stressed in his interview on Sunday that "considerable savings" would have to be found to keep the deficit at its current level.

Last Friday, he indicated that a temporary freeze imposed on some types of government spending, worth up to four billion euros, would be made permanent.

Villepin insisted France would "do everything to keep to our commitments" and predicted that the deficit would fall to 2.7 percent in 2006.

This differs from the view of European Commission economists, who expect France to return to excessive deficit in 2006. They forecast a shortfall of 3.4 percent of output.

The current government target for economic growth in 2006 is for 2.25-2.75 percent. The rate of growth largely determines the amount of tax revenue.

De Villepin cast some doubt on this figure on Sunday, saying he "hoped" growth would be higher than 2.0 percent.

Copyright AFP

Subject: French news

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