French finance minister plays down impact of any fiscal goal delay

PARIS Mon Feb 18, 2013 9:35am EST

French Economy and Finance Minister Pierre Moscovici leaves the Elysee Palace following the first weekly cabinet meeting of the year in Paris January 3, 2013. REUTERS/Philippe Wojazer

French Economy and Finance Minister Pierre Moscovici leaves the Elysee Palace following the first weekly cabinet meeting of the year in Paris January 3, 2013.

Credit: Reuters/Philippe Wojazer

PARIS (Reuters) - France will await European Commission growth forecasts this week before deciding whether to adjust its 2013 fiscal plans, Finance Minister Pierre Moscovici said on Monday, playing down the impact of any delay to its deficit-cutting plans.

Moscovici did not rule out the government adding to the 60 billion euros ($80 billion) in spending cuts it has set for its five-year term, although he said too much austerity at a time of weak growth would be a bad idea.

The government will review its growth and deficit targets once it has the Commission forecasts, he said, adding that pushing back a 3 percent deficit goal would not be viewed as serious as long as France is trimming its structural deficit.

"I don't think our credibility will be damaged if something exceptional intervenes," Moscovici said. "Credibility lies with the structural deficit above all."

Prime Minister Jean-Marc Ayrault acknowledged last week that weaker-than-expected growth was pushing France's 2013 deficit goal of 3 percent of economic output out of reach.

The European Union's top economic official, Olli Rehn, opened the door last week to giving member states more time to cut their public deficits as long as they can demonstrate that their underlying deficit-cutting measures were serious.

Rehn wrote in a letter to EU finance ministers that countries should keep reducing structural gaps, which reflect underlying shortfalls unaffected by swings in the business cycle.

The French government says it trimmed the structural deficit by 1 percent in 2012 and will cut it by 2 percent this year.

The 3 percent headline target was based, however, on a growth target of 0.8 percent that the International Monetary Fund and others have said looks out of reach. Most economists expect growth this year to be closer to zero.

As French media speculated that the government was asking ministries to speed up cost cuts in light of the grim fiscal outlook, a government source said letters would be sent out to ministries at the start of March laying out cuts for 2014.

The daily Les Echos said extra savings of 4-5 billion euros would have to be found this year to plug a hole in the budget.

Moscovici said the Socialist government would discuss its deficit outlook with Commission officials in the days ahead as it prepares a fiscal stability programme it will present to parliament in mid-March and submit to Brussels in April.

"It's depending on this dialogue how we will adjust our measures," he said.

Moscovici also said the government was still working on a way to redraft its plan to temporarily impose a symbolic 75 percent tax on annual income above 1 million euros after France's highest court rejected its initial proposal in January.

He said the government was waiting for advice from a constitutional judge before deciding whether to stick with the 75 percent figure or reduce it. A decision should come in March. ($1 = 0.7490 euros)

(Reporting by Catherine Bremer; Editing by Hugh Lawson)

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