PARIS (Reuters) - France should worry more about the credibility of its efforts to cut back on flab in public finances than whether or not it meets the EU’s 3 percent of GDP target for the budget deficit immediately, the IMF’s mission chief said on Wednesday.
The comments are the latest sign that France, hanging on grimly to the last of its top AAA credit ratings, may need - and could receive - some leeway on targets that are threatened by poor growth rates across the euro zone.
The International Monetary Fund forecast this month that France would miss its 2013 target for a deficit of 3 percent of gross domestic product, estimating the shortfall would come in at 3.5 percent due to weaker-than-expected growth.
EU Economic and Monetary Affairs Commissioner Olli Rehn said last week that France did not need additional savings measures and opened the door to “softer adjustment”.
Spanish newspaper El Pais reported on Saturday that the European Commission would propose Spain, France and several other euro zone states more time to cut their public deficits below the target limit of 3 percent of GDP.
Edward Gardner said that in order to respect the 3 percent target the Socialist government would have to carry out even more belt-tightening than already planned, which would weigh on growth that already was likely to be subdued.
“Our recommendation is that France discuss the fact in a broader European context (about what would be) the appropriate stance for 2013,” Gardner said in a conference call with journalists.
Eager to forge his fiscal credibility, President Francois Hollande already aims to carry out a belt-tightening effort that is unprecedented in modern France in order to reach the deficit target.
“The importance is really the credibility of the medium-term orientation of policies,” Gardner said.
“Whether it’s 3 or 3.5 percent next year matters less to the extent that France can give reasonable credible assurances about the direction of policies,” he added.
Reporting by Leigh Thomas; editing by Patrick Graham