IMF warns France on deficit

30th July 2010, Comments 0 comments

The IMF warned France on Friday that it would fail to meet its goal of reducing the public deficit to 3.0 percent of output in 2013 unless it made "further efforts" to curb spending.

The French government has pledged to narrow the shortfall in public finances, covering central and regional government spending along with social welfare, from a record 8.0 percent this year to 6.0 percent in 2011, and 3.0 percent -- the level prescribed by the eurozone -- in 2013.

The International Monetary Fund in an annual assessment of the French economy predicted that France would reduce the deficit to 6.1 percent next year thanks to already announced austerity measures.

But it warned that deficit reduction would then slow, with the shortfall coming to 3.9 percent in 2013 and 3.2 percent in 2014.

The IMF forecast that France would not lower the deficit to below 3.0 percent until 2015.

It said the public debt would likely climb to 90 percent of gross domestic product before easing slightly starting in 2015.

"Overall, the recently announced fiscal measures, provided these are legislated and implemented, are sizeable and ensure that all levels of government participate in fiscal consolidation," the IMF said.

"The announced fiscal package contains a range of necessary elements but further efforts are needed to achieve the envisaged consolidation beyond 2011."

A source close to Finance Minister Christine Lagarde said "the best way to get where we must be in 2013 is to secure (the objective) in 2011."

The source noted that the IMF had sharply improved its deficit forecast for next year, foreseeing a 6.1 percent shortfall rather than a previously estimated 7.0 percent.

For the IMF, France must implement pension reform, impose limits on retirement and health spending, and closely monitor regional budgets.

It also said it was important to expand the value-added and corporate tax bases and to introduce a European Union-harmonised carbon tax.

© 2010 AFP

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