France raises public debt forecasts for 2012 and 2013

France increased its public debt forecasts for 2012 and 2013 on Wednesday to take into account the 6.6 billion euros it will have to pay into the ESM eurozone permanent rescue fund.

Forecasts presented to the French cabinet said public debt would be 89.1 percent of gross domestic product this year instead of the 88.3 percent previously predicted.

Public debt was predicted to rise next year to 89.3 percent of output, higher than the earlier forecast of 88.2 percent.

The French cabinet on Wednesday approved the setting up of the European Stability Mechanism fund, which was created to ease market pressure on indebted nations like Greece and prevent contagion across the eurozone.

France is due to pay 6.6 billion euros into the fund this year, with more payments due over the following three years.

The ESM will run in parallel with the temporary European Financial Stability Facility for one year.

The combined capacity of both funds is supposed to be capped at 500 billion euros ($650 billion), but several eurozone countries plus the European Central Bank and the European Commission want it to be larger.

Struggling to get its public finances under control, the French government has imposed two deficit-cutting packages aimed at saving a total of 72 billion euros since August.

It has said it needs to save 100 billion euros to balance its budget by 2016 but President Nicolas Sarkozy has vowed no new austerity measures ahead of a presidential election in April.