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France battling in vain to hit EU deficit target

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France battling in vain to hit EU deficit target
13:35 CET+01:00
France's public deficit would probably amount to 3.7 percent of national output this year, President François Hollande admitted on Tuesday, publicly renouncing his government's goal of coming in below the EU limit of three percent.

"The public deficit in 2011 reached more than five percent of national wealth, it was 4.5 percent at the end of 2012 and will probably be 3.7 percent in 2013, even if we are trying to make it less," Hollande acknowledged during a visit to Dijon.

Hollande said his government had made an "unprecedented" effort to battle the deficit, adding: "The best economic strategy is to stay on this course and do nothing that could weaken growth.

"Rebalancing accounts is a financial and moral obligation, but it is also an obligation for our sovereignty because France must never be in trouble on the markets," Hollande said.

He also noted that France currently has "the lowest interest rates in its history".

Earlier this month, the country's budget minister revealed France needs an extra €6 billion in revenues next year to plug a gaping hole in its coffers. The European Central Bank also said it had to act fast to cut spending and retain credibility after slashing the 2013 growth forecast.

Budget Minister Jerome Cahuzac told Europe 1 radio that France's "budgetary situation is such that we have to find €6 billion in extra receipts".

But he did not specify how this would be achieved saying taxes "are already very high in France". French ministries have been informed how much to cut spending in order for the government to generate €2 billion in savings this year.

"Economies in public spending are inevitable," Cahuzac said. "We have started to do it, we will continue to do it," he added.

Benoît Coeure, a Frenchman who sits on the managing board of the European Central Bank, said on Monday that Paris had to take strong action to convince its European Union partners that it was serious about keeping to the EU's deficit norms.

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