French budget deficit falls

 

France's central government slashed its budget deficit last year by a third thanks to the end of one-off spending measures, the budget ministry said today, but state auditors said much tougher austerity measures were needed to hit EU targets.

The central government's 2011 shortfall came in at €90.8 billion, €4.5 billion better than forecast in last year's budget, meaning France should comfortably beat its overall state deficit target for last year of 5.7 per cent of GDP.

President Nicolas Sarkozy said recently the overall public deficit - which includes social security and local authority spending - could have dipped as low as 5.3 per cent of gross domestic product last year, putting France well on track to meet this year's target of 4.5 per cent.

Today's figures showed that, while revenues were flat last year, the central government was able to slash its deficit as spending tumbled by 14 per cent to €365.4 billion.

Spending in 2010 had been boosted by a €32 billion one-off charge for a government future investment programme covering everything from industry to research and teaching, and an exceptional payment to regional governments to cover the cost of a reform to France's local business tax.

France's Court of Auditors - a quasi-judicial body charged with reviewing public finances - said in a report that the government last year had taken only one tenth of the measures required to keep its promise of balancing the public finances by 2016 and that much tougher steps would be needed.

"At this rate it would take 10 years to get to budgetary equilibrium," said Didier Migaud, first president of the Court of Auditors. "The biggest steps will remain to be taken in 2013 and 2014."

The Court of Auditors estimated that France had reduced its structural deficit - excluding cyclical economic effects - to 4.5 per cent of GDP in 2011, down by just 0.5 of a percentage point from the previous year.

It called for Mr Sarkozy, who trails his Socialist rival Francois Hollande in polls ahead of the first round of presidential elections in April, to clearly lay out the government's plans for meeting this commitment.The court urged the government to slash €15 billion from the myriad exemptions that litter France's complex tax code.

Mr Sarkozy's government has pledged to cut its public deficit to 4.5 per cent of GDP this year and to within an EU ceiling of 3 per cent by 2013, but its task is being complicated by a slowdown in French growth.

Reuters