Crisis-hit France eyes gradual deficit reduction

France’s finance minister on Wednesday forecast that the country’s budget deficit would scrape below the European Union ceiling by 2017, as he unveiled his annual budget.

Michel Sapin told reporters that the deficit would be 2.8 percent of gross domestic output in 2017, just below the EU’s three-percent ceiling.

France had promised Brussels it would get below the three-percent limit next year but in a dramatic about-turn earlier this month, pushed back the commitment by two years.

Sapin also forecast a very gradual recovery for the crisis-hit French economy, which he said would reach a level of two percent growth only in 2018.

The economy is projected to grow by only 0.4 percent this year, recovering progressively to 1.0 percent in 2015, 1.7 percent in 2016 and 1.9 percent in 2017.

The minister said the economy would then grow by two percent in 2018 and 2019.

France is struggling through a deep economic crisis, with zero growth in the previous two quarters and sky-high unemployment.

The response of President Francois Hollande’s deeply unpopular government has been a controversial package of tax cuts financed by cuts in public spending.

Hollande hopes to offer businesses some 40 billion euros ($50 billion) in tax breaks over three years in return for creating 500,000 jobs.

But given the parlous state of France’s public finances, he intends to pay for these tax breaks with 50 billion euros in public spending cuts — a measure that has proved highly unpopular with the left flank of Hollande’s Socialist Party.

Sapin stressed that he would stick to the target of 21 billion euros in public spending this year and 50 billion over three years.

“We have a plan and we’re sticking to it,” he told reporters.

In a symbolic measure of the crisis France is facing, the statistics office on Tuesday announced that the country’s national debt had risen above the bar of 2.0 trillion euros for the first time — or 95.1 percent of GDP.

European Union rules say that debt must not exceed 60 percent of GDP, or be falling significantly towards this ratio.

Sapin predicted that public debt would peak in 2016 at 98 percent of GDP, before dropping back.

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