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IMF

IMF warns France on deficit, slowing growth

France will probably need extra action to cut its public deficit in 2012 and 2013 as falling growth threatens to complicate economic recovery, the International Monetary Fund said on Wednesday.

The IMF forecast that growth in France, the eurozone’s second-biggest economy, would slow in 2012 to 1.9 percent from 2.1 percent this year. This was sharply lower than the French government’s 2012 forecast of 2.25 percent growth.

“Progress is being made in fiscal consolidation but more efforts might be needed to reach the 2012-13 targets,” it said in a report due for publication later Wednesday but released early by the French economy ministry.

It said that without further efforts France was set for a public deficit of 3.8 percent of output in 2013, above the EU three-percent limit and France’s forecast. French public debt would peak at 88 percent that year, it added.

France is under growing pressure to cut its own deficit after its President Nicolas Sarkozy last week played a leading role in drawing up a new debt bailout for Greece to stabilise the eurozone.

He is trying to push through a change to France’s constitution that would oblige its government to keep a rigorously balanced public budget, but faces a battle with the Socialist opposition over the plan.

Officials are concerned that France’s credit rating could suffer if Sarkozy were forced to call a special assembly to pass the budget law. Analysts warn that France is the weakest of the European countries to hold a top credit rating.

“France cannot risk missing its medium-term fiscal targets given the need to strengthen implementation of the (EU) Stability and Growth Pact and keep borrowing costs low by securing France’s AAA-rating,” the IMF report said.

Sarkozy’s constitutional reform “would help to unequivocally signal the authorities commitment to the adjustment path.”

France has vowed to get its deficit down to 5.7 percent of gross domestic product (GDP) this year, 5.6 percent next year, and down to the EU limit of three percent in 2013, but this strategy relies on growth picking up.

The IMF “expects GDP growth and revenue outcomes from 2012 to be weaker than those currently foreseen by the authorities and hence the deficit ratio to fall more slowly than envisaged,” Wednesday’s report said.

“Under (IMF) staff’s current projections, achieving the deficit target of three percent of GDP by 2013 requires further measures.”

The International Monetary Fund and analysts have warned that the fragile global economic recovery could falter in the coming years, citing the European and US debt risk and a threat of emerging economies overheating.

French Socialist presidential hopeful Segolene Royal said on Wednesday the deficit had grown under Sarkozy’s leadership and his bid to fix the public finances was “like a driver without a licence trying to give driving lessons.”

Sarkozy has vowed to cut tax breaks but on Tuesday said he would not reverse a cut in value-added tax on cafes and restaurants — a promise interpreted by Le Monde newspaper as a nod to voters.

“It’s the first gift of his presidential campaign,” it said.

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SARKOZY

Corruption trial begins for France’s ex president Sarkozy

Former French president Nicolas Sarkozy goes on trial on Monday on charges of trying to bribe a judge, in what could be a humiliating postscript to a political career tainted by a litany of legal investigations.

Corruption trial begins for France's ex president Sarkozy
Nicolas Sarkozy. Photo: AFP

Though he is not the first modern head of state in the dock – his predecessor and political mentor Jacques Chirac was convicted of embezzlement – Sarkozy is the first to face corruption charges.

He fought furiously over the past six years to have the case thrown out, and has denounced “a scandal that will go down in history”.

“I am not a crook,” the 65-year-old, whose combative style has made him one of France's most popular rightwing politicians, told BFM TV this month.

Prosecutors say Sarkozy promised the judge a plush job in Monaco in exchange for inside information on an inquiry into claims that Sarkozy accepted illicit payments from L'Oreal heiress Liliane Bettencourt for his 2007 presidential campaign.

Their case rests in large part on wiretaps of phone conversations between Sarkozy and his longtime lawyer Thierry Herzog, which judges authorised as prosecutors also looked into suspected Libyan financing of Sarkozy's 2007 campaign.

That inquiry is still underway, though Sarkozy caught a break this month when his main accuser, the French-Lebanese businessman Ziad Takieddine, suddenly retracted his claim of delivering millions of euros in cash from Libyan dictator Moamer Kadhafi.

Sarkozy and Herzog have assailed the taps on their phones as a breach of client-attorney privilege, but in 2016 a top court upheld their use as evidence.

Charged with bribery and influence peddling, Sarkozy risks a prison sentence of up to 10 years and a maximum fine of €1 million.

Herzog, a leading member of the Paris bar, faces the same charges as well as violation of professional secrecy. The trial is expected to last three weeks.

'A boost'

Investigators discovered that Sarkozy used an alias – Paul Bismuth – to buy a private phone for conversing secretly with his lawyer.

On around a dozen occasions, they discussed reaching out to a top French judge, Gilbert Azibert, a general counsel at the Cour de Cassation, France's top appeals court for criminal and civil cases.

Prosecutors say Azibert, who is also on trial, was tasked with trying to obtain information from the Cour de Cassation lawyer in charge of the Bettencourt inquiry, and to induce him to seek a verdict in Sarkozy's favour.

In exchange, Sarkozy would use his extensive contacts to give “a boost” to Azibert's efforts to secure the cushy Monaco post.

“He's been working on it,” Herzog tells Sarkozy in a call from early 2014.
Azibert was already considered a leading candidate for the job, but “if you give him a boost, it's always better,” Herzog says in another.

“I'll make him move up,” Sarkozy tells Herzog, according to the indictment by prosecutors, who compared his actions to those of a “seasoned offender”.

But later, Sarkozy tells his lawyer that he would not “approach” the  Monaco authorities on Azibert's behalf — a sign, according to prosecutors, that the two men had been tipped off about the wiretaps.

“Mr Azibert never got any post in Monaco,” Sarkozy told BFM television this month – though under French law, just an offer or promise can constitute corruption.

Still in limelight

Sarkozy, a lawyer by training, has long accused the French judiciary of waging a vendetta against him, not least because of his attempts to limit judges' powers and criticism that they are too soft on delinquents.

He will again be back in court in March 2021 along with 13 other people over claims of campaign finance violations during his unsuccessful 2012 re-election bid.

Prosecutors accuse Sarkozy's team of using a fake-invoices scheme orchestrated by the public relations firm Bygmalion to spend nearly €43 million on the lavish run – nearly twice the legal limit.

The long-running legal travails hindered his comeback bid for the 2017 presidential vote, losing out as the rightwing nominee to his former prime minister François Fillon.

Yet like other former French presidents, Sarkozy has surfed a wave of popularity since announcing his retirement from politics in 2018, pressing the flesh with enthusiastic crowds at his public appearances.

Lines of fans queued over the summer to have him sign his latest memoirs, “The Time of Storms”, which topped best-seller lists for weeks.

SEE ALSO: Sarkozy accused of racism after 'monkey' comment

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