France says will meet its deficit target in 2014

BRUSSELS Mon Mar 4, 2013 3:33pm EST

France's Economy, Finance and Foreign Trade Minister Pierre Moscovici leaves 11 Downing Street in London February 25, 2013. REUTERS/Suzanne Plunkett

France's Economy, Finance and Foreign Trade Minister Pierre Moscovici leaves 11 Downing Street in London February 25, 2013.

Credit: Reuters/Suzanne Plunkett

BRUSSELS (Reuters) - France, the euro zone's second-largest economy, will miss its budget deficit target this year but can reach the goal in 2014, the country's Finance Minister Pierre Moscovici said on Monday.

Under pressure to show budgetary discipline to the rest of the euro zone and reassure financial markets, Moscovici pleaded for understanding from the European Commission, the EU executive that is policing countries' debts and deficits.

"We need to be intelligent and find a balance between fiscal consolidation and growth... France can bring its budget deficit to below 3 percent in 2014," Moscovici told a news conference after a meeting with his euro zone counterparts in Brussels.

"We will not meet our deficit forecast for 2013 and I don't want to deepen austerity at a time of recession and stagnation," Moscovici said, referring the euro zone's economy, which the Commission expects to shrink 0.3 percent this year.

"We don't have any more adjustment plans for 2013," he said of France.

France is expected to show almost no growth this year -- a 0.1 percent expansion -- the Commission said in its latest forecast last month.

Partly because of the lack of growth, the Commission has forecast that France's deficit will be 3.7 percent of gross domestic product (GDP) this year, well short of the 3 percent target under European rules.

Economists doubt the wisdom of severely restricting government spending at a time of recession and Italian voters rejected the austerity policies of outgoing Prime Minister Mario Monti in a vote last month, the latest popular protests sweeping the euro zone.

But France also knows it must set an example as one of the leading economies in Europe, Moscovici said.

"We will show how serious we are in our structural reforms and our structural deficit," Moscovici said, referring to the budget shortfall that strips out the effects of the business cycle on government revenue and expenditure, as well as one-off items. "We will not fall into lax policies," he said.

(Editing by Jan Strupczewski)

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Comments (1)
dareconomics wrote:
According to the rosy European Commission forecasts, France will have a deficit of 3.7% this year. The deficit was t least 5.2% of GDP for 2012, so the EC is expecting France to decrease its deficit almost 30% in a year where its economy will remain stagnant in the best case scenario. In fact, current PMI numbers favor a recession in France:

France February PMI

The article fails to mention that Moscovici was guaranteeing that France would meet its 3% deficit target in 2013 just a few weeks ago. He is now backpedaling and has pushed off compliance until 2014.

With the French economy entering a recession, attaining the goal of a 3% budget deficit must be put off indefinitely.

Full post with charts here:

Mar 05, 2013 12:11pm EST  --  Report as abuse
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