Finance minister says France will hit deficit target for 2012
July 4, 2012, 12:10 am TWN
PARIS -- France will meet its target of cutting its budget deficit to 4.5 percent of gross domestic product (GDP) this year, Finance Minister Pierre Moscovici said on Tuesday.
But without amendments, the deficit would hit 5 percent of GDP, he added. With economic output at around 2 trillion euros, that suggested the government needed to find budget cuts worth roughly 10 billion euros.
"Our objectives will be met: a deficit of 4.5 percent in 2012, then reduced to 3 percent in 2013 — which is a considerable step — before returning to budget equilibrium in 2017," Moscovici told a financial conference in Paris.
Prime Minister Jean-Marc Ayrault was due to outline the government's policy agenda to parliament later on Tuesday.
Government sources have said the new Socialist administration plans new taxes on the wealthy and large corporations that would net it some 7.5 billion euros, money it would use to plug the budget gap.
The state auditor said on Monday it was critical for France to hit its 3 percent deficit target next year in order to retain market confidence. But doing so would entail more than 33 billion euros in austerity measures, it said, recommending cuts to public sector staffing to achieve that.
Moscovici said that France's plans would not be disrupted by a one-off charge of some 5 billion euros next year in tax repayments to foreign investment funds following a recent European Union ruling against Paris.
And on banking regulation, he said that French banks should not rush to implement the Basel III capital requirements ahead of a deadline if that meant slowing credit supply to the real economy.
"It's important not to rush the implementation of these reforms vis-a-vis the calendar defined by the Basel committee, allowing a gradual implementation of these rules so as to avoid a too brutal impact on the financing of the economy," Moscovici said.
He also said that France's international partners, notably the United States, should press ahead with implementing the rules on time so as to ensure a level playing field for competition.