France warned on missing deficit targets

2014-02-11 01:00:35

(MENAFN- AFP) France is running a "significant risk" of missing its budget deficit targets and the government's latest plans will not be enough to meet EU limits, national auditors warned on Tuesday.The public accounts court said that a slow start to slashing spending meant that the government would have to cut even deeper than the targeted 50 billion euros ($68.0 billion) in the 2015-2017 period.The president of the highly influential court, Didier Migaud, said that efforts to cut public spending had to be "pursued and increased in the next three years."The court warned that "savings needed in the period 2015-2017 exceeds 50 billion euros", as targeted by the government.The report comes as the Socialist-led government under President Francois Hollande is in disarray over tax policy and reforms.France is the eurozone's second-biggest economy, and the state of its finances are closely watched by its partners, in particular economic powerhouse Germany.The public accounts court said that France could miss its public budget deficit target of 4.1 percent of gross domestic product (GDP) for 2013, and warned that reaching the 3.6-percent target for this year "is not yet assured".France has won extra time from the European Commission, until 2015, to get its public deficit within the permitted ceiling of 3.0 percent of GDP, but Brussels has warned Paris it has no margin of error in bringing its finances back into line.The court concurred, saying the 2014 budget "has no security margin to handle unexpected expenses."The report from the court, which each year gives an overall assessment of the state of public finances, comes just as the government begins work on cost cutting.The cuts are the key factor in a change of policy by Hollande, currently on a state visit to the United States, to finance a promised cut in taxes and charges on businesses to help them regain competitiveness on world markets.Hollande, whose approval ratings are the lowest of any modern French leader, is under intense pressure to revitalise the French economy and reduce an unemployment rate that is at a 15-year high.Confusing signals, rosy forecasts

But Hollande's Socialist-Green government faces internal strains and opposition from vested interests in making cuts and it has sent confusing signals to the market.Hollande himself has raised the prospect of cutting taxes faster than envisaged to boost to jobs creation, only to see his finance minister and much-criticised prime minister say publicly that the deficit cut pledges remain the top priority.The government is also locked in tough talks with businesses to extract commitments to boost hiring in exchange for the tax cuts, with the head of the French business federation and prime minister trading public barbs on Tuesday.The latest policy switch marks a break, notably for a left-wing government, by emphasising so-called supply-side measures that give businesses more freedom to make profits, although officials are keen to ensure this also translates into jobs.Meanwhile the government has also launched extensive reviews aimed at a fundamental revision of the tax systems on businesses and households.The court also criticised the government for rosy forecasts, which have led to disappointing budget performance.Revenues in 2013 were overestimated by 16 billion euros.The shortfall explains, for the most part, why the reduction in the deficit was about half the 1.5 points drop set in the government's fiscal plans, it said. And instead of 0.8-percent growth in 2013 as originally foreseen, the French economy expanded at just 0.1 or 0.2 percent.The court's annual report also highlights selected cases of mismanagement and waste, and this year it highlighted military cooperation with Britain.It said nearly 200 million euros spent on buying British studies of aircraft carriers was "a pure subsidy of the British programme" and that the failure of the programme could have been foreseen.

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