France lowers 2012 growth forecast ahead of budget revision

PARIS Mon Jul 2, 2012 12:33am EDT

French Finance Minister Pierre Moscovici leaves a news conference at the Bercy Ministry building in Paris June 13, 2012. REUTERS/Gonzalo Fuentes

French Finance Minister Pierre Moscovici leaves a news conference at the Bercy Ministry building in Paris June 13, 2012.

Credit: Reuters/Gonzalo Fuentes

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PARIS (Reuters) - France will lower its economic growth forecasts for this year as part of a revised budget the government will present later this week to meet its public deficit targets, Finance Minister Pierre Moscovici said on Sunday.

The country's national audit office is expected to reveal a shortfall of about 8 billion euros ($10.15 billion) on Monday when it publishes the results of an official review of public finances that new President Francois Hollande ordered, the Journal du Dimanche (JDD) newspaper earlier said.

In an interview with Le Figaro newspaper, Moscovici said the government would reduce its 2012 growth forecast to at least 0.4 percent from 0.7 percent when its revised budget is presented to the cabinet on Wednesday.

"As for 2013, everybody knows that we won't reach 1.7 percent. (So) betting on a range between 1 percent to 1.3 percent ... seems more credible," he said.

Without citing sources, the newspaper said the government would need to fill a gap of between 7.5 billion and 8 billion euros to meet its deficit target of 4.5 percent of gross domestic product this year from 5.2 percent in 2011.

"We will have to adjust immediately the 2012 budget because the one put together by the last government would not enable us to reach the 4.5 percent deficit by year-end," Moscovici said.

"The audit office should confirm that certain measures to the tune of 1.5 billion euros were not financed."

Prime Minister Jean-Marc Ayrault will outline the government's strategy for restoring the health of the public finances in a speech on Tuesday.

A government source confirmed to Reuters last week the budget revisions would contain about 7.5 billion euros in new tax measures, including an increase in wealth tax, the abolition of a tax exemption for overtime, and new levies on banks, oil product stocks and company dividends.

RATINGS SLIP

The government is also planning to increase to 20 percent from 8 percent a tax on company profit-sharing bonuses paid annually to all employees, the newspaper said.

In addition the audit office's report would show a delay in revenues from value added tax entering the government's coffers and an overestimation of expected corporate tax revenues, the paper said.

Hollande has pledged to target the rich and big companies in order not to sap consumer spending, but a poll on Friday showed 54 percent of French thought the new taxes would fall mostly on the middle class.

His approval ratings have fallen seven points in a month to 55 percent, according to a Vivavoice poll to be published for left-leaning Liberation newspaper on Monday, reflecting growing economic malaise and fears of austerity measures as his Socialist government scrambles to control costs and spur growth.

Lawmakers in the lower house of parliament are due to begin reviewing the amended budget bill on July 18, followed by senators the following week. The bill is due to return to the lower house for a final vote on July 31. ($1=0.7880 euros)

(Reporting By John Irish; Editing by Sophie Hares)

(This story corrects a typo in the headline)

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