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French deficit drops, auditor urges stronger action
February 8, 2012 / 11:04 AM / 6 years ago

French deficit drops, auditor urges stronger action

PARIS (Reuters) - France’s central government slashed its budget deficit last year by a third thanks to the end of one-off spending measures, the budget ministry said on Wednesday, but state auditors said much tougher austerity measures were needed to hit EU targets.

The central government’s 2011 shortfall came in at 90.8 billion euros, 4.5 billion euros better than forecast in last year’s budget, meaning France should comfortably beat its overall state deficit target for last year of 5.7 percent of GDP.

President Nicolas Sarkozy said recently the overall public deficit -- which includes social security and local authority spending -- could have dipped as low as 5.3 percent of gross domestic product last year, putting France well on track to meet this year’s target of 4.5 percent.

Wednesday’s figures showed that, while revenues were flat last year, the central government was able to slash its deficit as spending tumbled by 14 percent to 365.4 billion euros.

Spending in 2010 had been boosted by a 32 billion one-off charge for a government future investment program covering everything from industry to research and teaching, and an exceptional payment to regional governments to cover the cost of a reform to France’s local business tax.

France’s Court of Auditors -- a quasi-judicial body charged with reviewing public finances -- said in a report that the government last year had taken only one tenth of the measures required to keep its promise of balancing the public finances by 2016 and that much tougher steps would be needed.

“At this rate it would take 10 years to get to budgetary equilibrium,” said Didier Migaud, first president of the Court of Auditors. “The biggest steps will remain to be taken in 2013 and 2014.”

The Court of Auditors estimated that France had reduced its structural deficit -- excluding cyclical economic effects -- to 4.5 percent of GDP in 2011, down by just 0.5 of a percentage point from the previous year.

It called for Sarkozy, who trails his Socialist rival Francois Hollande in polls ahead of the first round of presidential elections in April, to clearly lay out the government’s plans for meeting this commitment.

The court urged the government to slash 15 billion euros from the myriad exemptions that litter France’s complex tax code.

Sarkozy’s government has pledged to cut its public deficit to 4.5 percent of GDP this year and to within an EU ceiling of 3 percent by 2013, but its task is being complicated by a slowdown in French growth.

The Bank of France said in its monthly report on Wednesday that the 2 trillion euro economy would see zero growth in the first quarter as it succumbed to a slowdown across the crisis-hit euro zone.

France has one of the highest levels of public spending in Western Europe, due in part to its generous welfare system, running at around half of GDP.

“The recurrent deficits of our social security system, which have no equivalent elsewhere in Europe, are anomalies and must be eliminated,” Migaud said, adding that the effort should be made by slashing spending rather than hiking taxes.

“Our country has to escape as quickly as possible from the dangerous position it finds itself in because of its debt levels.”

Writing by Daniel Flynn; editing by Ron Askew

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