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France's public debt set to hit record levels

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France's public debt set to hit record levels
France's public debt to hit €2 trillion by 2014, Le figaro reported newspaper has reported. Photo: Joel Saget/AFP
13:15 CEST+02:00
France's economy is set to break more records in the coming months, but there will be no cause for celebration. After its jobless total hit a historic high earlier this year, the government said on Tuesday that public debt will reach a record 95.1 percent of GDP.

France admitted on Wednesday its public debt would hit a record 95.1 percent of GDP in 2014, far higher than previous estimates, as it unveiled next year's draft budget for the embattled eurozone economy.

But the government said debt should fall back in 2015, and reiterated a pledge to meet its EU-mandated deadline to bring the public deficit below three percent that year.

The announcement comes after Le Figaro newspaper claimed the debt would hit €2 trillion by next, a figure that was not rejected by the country's finance minister.

The draft budget was presented to the cabinet by Finance Minister Pierre Moscovici and Budget Minister Bernard Cazeneuve, who outlined "unprecedented" €15-billion ($20-billion) cuts in public spending as France tries to rein in its public deficit without compromising growth.

The country is battling to rekindle tepid economic growth back amid record-high unemployment, limited investment and low consumer spending.

Some 80 percent of fiscal savings next year will come from cuts in public spending and 20 percent from a rise in taxes, the ministers said.

These decisions are based on an estimated 0.9 percent rise in GDP next year, close to a consensus of 0.8 percent amongst French economists.

European Union rules require public debt to be no more than 60 percent of GDP or falling towards this ratio.

Adding to concerns, Didier Migaud, president of the Cour des Comptes - France's public auditor - has said that the current financial state of the country's generous healthcare system was "worrying".

The system is haemorrhaging money, with a deficit expected to hit nearly $8 billion this year.

This "maintains a particularly abnormal and particularly dangerous spiral of social debt," Migaud said as he unveiled an annual report on the state of France's social security system.

The country's heavy debt load has caused concern that financial markets could turn against France, but that has yet to happen.

France's borrowing prices are quite reasonable and have even hit record lows in the past two years.

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