UPDATE 3-France to miss 2013 deficit goal, says prime minister

Wed Feb 13, 2013 4:19pm EST

Related Topics

* PM acknowledges for first time fiscal goal out of reach

* Announcement follows mixed messages from ministers

* France seen seeking market confidence with plans for cuts

PARIS, Feb 13 (Reuters) - France is likely to miss this year's public deficit goal because of weak growth, 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 euro zone'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 Foreign Minister Laurent Fabius the first minister to say that it would be missed while Finance Minister Pierre Moscovici said the goal had not been changed.

Moscovici admitted 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 March, 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 2012 GDP data will be released on Thursday.

MARKET CONFIDENCE

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 free 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.

Deutsche Bank economist Gilles Moec said that France would try to maintain market confidence by spelling out how spending cuts would be made, something the government has avoided so far.

"Paris understands that it is high time to be more concrete on this side of the consolidation effort," he said in a research note.

France's Court of Auditors said on Tuesday it believed the deficit goal would be blown off course as the economy veered close to recession, despite the government's effort to make an unprecedented 38 billion euros of savings this year.

It urged the European Union to make clear how it would judge member states' deficit-cutting efforts, the most explicit call to date from a French authority for Brussels to clarify how it would react to France overshooting its budget targets.

The European Commission last year granted some leeway to Spain by saying it would focus on its structural fiscal gap, which takes economic cycles into consideration, rather than the nominal deficit. New EU treaty rules also put greater emphasis on efforts to narrow underlying budget shortfalls.

An official modification of France's budget targets is likely to come in the fiscal stability programme the government will present to parliament in mid-March before submitting it to the European Commission.

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