France is likely to miss this year’s public deficit goal because of weak growth, French Prime Minster Jean-Marc Ayrault said on Wednesday, acknowledging for the first time that a cornerstone of his government’s fiscal policy was crumbling.
France is battling to maintain its credibility with its EU partners, rating agencies and financial markets in the face of serious misgivings over its efforts to reform a stalled economy and cut the budget gap this year to the EU ceiling of 3 percent of economic output.
“We won’t be there exactly at 3 percent in 2013 for a simple reason because growth in France, in Europe and the world is weaker than expected,” Ayrault said on France 3 television.
The target was based on a government forecast for growth of 0.8 percent, but economists polled by Reuters estimate on average that the eurozone’s second-biggest economy will post zero growth this year.
Ayrault declined to estimate by how much the target would be missed and insisted that the government remained committed to a pledge to cut the deficit to zero by 2017.
His government sent mixed messages about the target earlier on Wednesday with French Foreign Minister Laurent Fabius the first minister to say that it would be missed while French Finance Minister Pierre Moscovici said the goal had not been changed.
Moscovici said that it would be “difficult” to reach growth of 0.8 percent and said the Socialist government would examine if it needed to re-evaluate its goals in late next month, following the publication of the European Commission’s new economic outlook.
“Our goal is for 0.8 percent growth for 2013. Let’s admit it’s going to be difficult,” Moscovici said. “I am perhaps better placed than whoever else to know that, and it’s the same for the deficit. Then there is our timetable [for a review] which has not changed.”
Preliminary GDP data for last year was to be released yesterday.
French Budget Minister Jerome Cahuzac backed Moscovici by saying that although the 3 percent target would be difficult to meet, it was not impossible.
“In any case, we won’t be far from 3 percent in 2013,” he told Direct Matin newspaper.
Moscovici had already said a review could come around April and many expect France will seek to negotiate an extra year with its EU partners to meet the 3 percent deficit limit despite the risk of a sell-off of French government debt in response.