French 2003 deficit is worst performance in EU

9th March 2004, Comments 0 comments

PARIS, March 9 (AFP) - The French public deficit widened to 4.1 percent of output last year, the worst performance in the European Union, with the government projecting Tuesday that the shortfall would not conform to eurozone rules until 2005.

PARIS, March 9 (AFP) - The French public deficit widened to 4.1 percent of output last year, the worst performance in the European Union, with the government projecting Tuesday that the shortfall would not conform to eurozone rules until 2005.

Budget Minister Francis Mer, in an interview with the newspaper Le Monde, said he had informed his eurozone colleagues that the public deficit would come to 3.6 percent of gross domestic product in 2004 "and will move below three percent of output in 2005."

The 12 countries using the euro are bound to hold annual public deficits, which cover spending by central and local governments along with certain social welfare administrations, to three percent or less of GDP.

France failed to meet that threshold in 2002 and, according to official data released here Tuesday, did so again in 2003.

The national statistics institute INSEE said the deficit had increased because growth of tax revenue had been weak owing to sluggish economic activity. Tax revenue had grown by 2.4 percent in 2003 after 2.0 percent in 2002 and 3.5 percent in 2001.

In sticking to the government's 2005 projection, Mer cited economic growth, "which is holding up well" and said "the consensus from economists is for growth superior to the 1.7 percent (this year), which is included in the budget."

For both 2004 and 2005, he added, "there will ne no increase in state spending and all supplemental tax revenues will be used to reduce the deficit."Mer also asserted that the new expenses the government expects to incur, reflecting lower restaurant sales taxes, credits to support research and the lifting of a tax on new business investment "will be spread out over time and will not all be charged to this year."

"If we make the choice to incur these expenses, because we consider them to be priorities, we have to reduce others and it is part of the government's role to choose."

He predicted that public finances in 2005 would be "strengthened by reform of the health insurance system if we are able to - and we will be able to - implement this reform in June-July."

He noted that the health insurance account - known here as social security - had passed from a surplus of EUR 7.2 billion in 2000 to a deficit of EUR 9.4 billion (USD 11.6 billion) in 2003

"Our goal is to reduce the social security deficit without lowering the quality of the care," Mer said.

"We can do better with less. We cannot continue to finance spending through debt."

Official figures Tuesday showed that the French public debt last year came to 63 percent of GDP, eclipsing the eurozone's agreed upon limit of 60 percent.

The data also revealed that obligatory charges had risen from 43.8 percent of output in 2002 to 43.9 percent in 2003 at a time when the government was promoting a campaign to cut taxes.

Mer said charges imposed by the state had been cut from 15.8 percent of GDP in 2002 to 15.5 percent last year. But those taken by social welfare bodies had risen from 21.5 percent of output in 2003 to 21.9 percent in 2003.

"The state continues to reduce its obligatory charges. But those take the most are the French themselves to finance their health spending," Mer told Le Monde.

© AFP

                                                              Subject: France news

 

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