France's bigger tax bonus to pay down debt

25th September 2006, Comments 0 comments

PARIS, Sept 25, 2006 (AFP) - France now expects a budget surplus of EUR 5 billion this year rather than three billion initially foreseen, enabling a further reduction in public debt, Finance Minister Thierry Breton said.

PARIS, Sept 25, 2006 (AFP) - France now expects a budget surplus of EUR 5 billion this year rather than three billion initially foreseen, enabling a further reduction in public debt, Finance Minister Thierry Breton said.

The national statistics institute INSEE meanwhile reported a slight dip in industrial confidence in September compared with its previous reading in July. But analysts said French manufacturing prospects remain generally healthy, although not without risk.

Speaking on France 3 television late on Sunday, Breton said the surplus would be "used entirely to pay down the debt."

The minister said that "in 2006 for the first time France will reduce its debt by two percentage points of GDP."

France's public debt stood at 66.5 percent of GDP in 2005, well above the 60 percent limit set under the terms of the European Union's Stability and Growth Pact.

The government has pledged to bring France back within the eurozone limit by 2010.

INSEE said its reading of industrial sector confidence slipped to 107 from 108 in July, noting that the situation "remains reasonably favorable, apart from the automobile sector."

It found that order books were at satisfactory levels and that prospects for production over the next three months, according to interviews with manufacturers, were slightly above the average for the period.

Alexander Law of the research group Xerfi said that while activity in the capital goods sector was "dynamic", the situation in the automobile industry was especially worrisome.

"Past production has deteriorated and stocks remain extremely heavy," he said. "That is damaging for French industry given the importance of the (automobile) sector, which sustains many small industrial suppliers."

Law added that the Monday's report did not point to a significant improvement in production between now and the end of the year.

At Natexis Banques Populaires, Marc Touati warned that "the party will be well and truly over in the next few months".

He said: "After the strong growth of the first half, it's now time for a return to realism — that's what the INSEE report has confirmed in September."

He noted that foreign orders for French industrial goods have weakened in the last two months.

"At the moment, the export motor is slowing down and French industry could face very difficult circumstances at the end of 2006 and especially in 2007."

Copyright AFP

Subject: French news

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