IMF warns France extra deficit action may be needed

27th July 2011, Comments 0 comments

France will likely need extra action to cut its public deficit to meet targets for 2012 and 2013, the International Monetary Fund said on Wednesday in an annual report on France.

The IMF also forecast that growth in the eurozone's second-biggest economy would slow in 2012 to 1.9 percent from 2.1 percent this year. This was sharply lower than the French government's 2012 forecast of 2.25 percent growth.

"Progress is being made in fiscal consolidation but more efforts might be needed to reach the 2012-13 targets," it said in a report due for publication later Wednesday but released early by French Economy Minister Francois Baroin.

Last month the IMF released figures showing France was set for a 2011 public deficit of 5.8 percent of output, nearly double the EU required limit and above the eurozone average, falling to 4.9 percent in 2012.

In that report the global lender forecast France would have public debt of 84.8 percent in 2011 rising to 86.6 next year.

France is under growing pressure to cut its own deficit after its President Nicolas Sarkozy last week played a leading role in drawing up a new debt bailout for Greece to stabilise the eurozone.

He is trying to push through a change to France's constitution that would oblige its government to keep a rigorously balanced public budget, but faces a battle with the Socialist opposition over the plan.

France has vowed to get its deficit down to 5.7 percent of gross domestic product (GDP) this year, 5.6 percent next year, and down to the EU limit of three percent in 2013, but this strategy relies on growth picking up.

The IMF "expects GDP growth and revenue outcomes from 2012 to be weaker than those currently foreseen by the authorities and hence the deficit ratio to fall more slowly than envisaged," Wednesday's report said.

"Under (IMF) staff's current projections, achieving the deficit target of three percent of GDP by 2013 requires further measures."

The International Monetary Fund and analysts have warned that the fragile global economic recovery could falter in the coming years, citing the European and US debt risk and a threat of emerging economies overheating.

© 2011 AFP

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