French cabinet approves plan to reach EU deficit targets

French president Francois Hollande’s government approved plans today to bring the public deficit into line with EU limits by the end of next year, though the programme was based on growth forecasts deemed optimistic by independent experts.

In a multi-year fiscal programme to be submitted to the European Commission, France said it expects growth to accelerate to 1 per cent this year, 1.7 per cent next year and 2.25 per cent in both 2016 and 2017.

Under that scenario the public deficit will reach the 3 per cent EU limit at a slightly slower pace than previously planned, falling to 3.8 per cent of GDP at the end of this year and 3.0 per cent next year, compared to 3.6 per cent and 2.8 per cent in earlier forecasts.

The government formally abandoned Hollande’s commitment to balance the budget by the end of his term in 2017, envisaging a deficit of 1.3 per cent of GDP in that year.

However an independent state fiscal watchdog said that while this year’s growth forecast was “realistic”, the 2015 forecast had “weaknesses” while projections for 2016 and 2017 were “optimistic”.

The European Commission, in charge of policing member states’ public finances, is expected to respond to French projections in early June after European parliamentary elections on May 25th, an EU source said. Reuters)