PARIS (AFP) – Crisis-hit France admitted it would suffer from slow growth and high budget deficits for the next three years at least, as it unveiled a gloomy annual budget on Wednesday.
Finance Minister Michel Sapin told reporters that France’s budget deficit would stay above the European Union’s maximum limit until 2017, blaming a sluggish eurozone economy and unusually low inflation.
The deficit, which EU rules state must be below three per cent of total economic output, will only reach this target in 2017, Sapin said, with a forecast of 2.8 per cent.
France had promised Brussels it would get below the three-per cent limit next year but in a dramatic about-turn earlier this month, pushed back the commitment by two years.
Paris has “lived up to its commitments,” Sapin insisted.
“The pace of deficit reduction has been adapted to the (economic) situation,” the finance ministry said in its budget statement.
“The French people will not be asked to make additional efforts because, although the government is aware of the seriousness of the budgetary situation … it refuses to impose austerity.”
The European Commission, which oversees European countries’ budgets, is scheduled to deliver its judgement on France’s economic woes next month.
In a twist of fate, it will almost certainly be former French finance minister Pierre Moscovici – appointed EU economic affairs commissioner – who will have to decide on the consequences for France for breaking the rules.
France is battling through a deep economic crisis, with zero growth in the previous two quarters and sky-high unemployment.
Sapin forecast a very gradual recovery for the French economy, which he said would reach a level of two per cent growth only in 2018.
The economy is projected to grow by only 0.4 per cent this year, recovering progressively to 1.0 per cent in 2015, 1.7 per cent in 2016 and 1.9 per cent in 2017.
The minister said the economy would then grow by two per cent in 2018 and 2019.
“The economic prospects in France and in Europe are not the same that we were promised a few months ago,” Sapin admitted.
The response of President Francois Hollande’s deeply unpopular government to the crisis has been a controversial package of tax breaks for companies financed by cuts in public spending.