PARIS (Reuters) - France cut its public sector deficit less quickly than planned last year, missing the government’s target and presenting a new setback for President Francois Hollande.
Figures on Monday also showed that the euro-zone’s second-biggest economy grew in the last quarter of 2013 largely because consumers pinched by rising taxes tapped their savings to finance spending.
Voters frustrated with a rising tax burden and Hollande’s broken promises to turn around the economy punished his Socialist Party in a local election at the weekend.
National statistics office INSEE said on Monday that the public deficit fell to 4.3 percent of gross domestic product in 2013 from 4.9 percent the previous year.
That meant Hollande’s government missed a deficit target of 4.1 percent which it had promised EU partners it would meet.
The worse-than-expected result means the government will have to make extra efforts this year to respect its pledge to bring its deficit in line with the European Union’s limit of 3 percent of GDP next year.
Any request for more time to meet the limit would be likely to go down badly with the European Commission, which has already granted Paris two extra years.
Weak economic activity weighed on tax receipts while spending was in line with budget, Finance Minister Pierre Moscovici said in a statement.
Gross public debt rose last year to a record 93.5 percent of GDP from 90.6 percent in 2012, also slightly missing the government’s target of 93.4 percent.
France’s public spending, which is among the highest in the world, reached a record 57.1 percent of GDP while tax income stood at 45.9 percent.
Desperate to relaunch his presidency in the face of record low ratings and election losses, Hollande is widely expected to reshuffle the government soon in order to focus better on reviving the economy.
Hollande aims to flesh out plans in the coming weeks to phase out 30 billion euros in corporate payroll taxes over three years, which he is counting on to restore companies’ lost competitiveness.
However, he has tied the tax relief to companies committing to hire and invest in France, which he hopes will get unemployment down from over 10 percent currently.
Confirming a preliminary estimate, INSEE said that the French economy grew 0.3 percent in the final quarter of 2013 after contracting 0.1 percent in the third quarter.
A breakdown showed that consumer spending, the traditional motor of French growth, was the strongest in nearly two years, rising 0.4 percent over the quarter.
That was because consumers put aside less of their spare cash, however, with the household savings rate dropping to 15.2 percent from 15.7 percent in the previous quarter.
Households also saw their purchasing power fall by 0.2 percent in the fourth quarter as their tax burden jumped by 5.2 percent over the period.
Economist Ludovic Subran at Euler Hermes said that consumers were unlikely to keep tapping their savings to finance spending, boding ill for growth this year, which the government hopes will reach 1 percent.
“With consumption weak and an adjustment in the public finances still underway, there’s a risk growth won’t be any more than 0.6 percent,” Subran said.
Additional reporting by Yann Le Guernigou; Editing by Catherine Evans