IMF and EU push for less fixation on targets for reduction of deficit
By Francois Becker ,AFPPARIS -- The International Monetary Fund and European Commission officials have encouraged France and its eurozone partners not to fixate on deficit reduction targets if it would exacerbate the bloc's debt crisis.
December 31, 2012, 12:12 am TWN
The head of an IMF mission in France, Edward Gardner, urged officials in Paris last week to consider their 2013 budget targets “in a broader European context.”
The IMF and the EU Commission expect the French public deficit to amount to 3.5 percent of gross domestic product (GDP) next year.
They do not believe France can reach its 3-percent goal, the eurozone limit, without additional measures that could aggravate an already tenuous economic situation.
“The credibility of the medium term orientation policy” was more important than a specific deficit target, Gardner told reporters.
Loosening the criteria would “be more effective, more credible in a coordinated fashion” across the 17-nation eurozone, he suggested.
In Portugal the public deficit fell at the end of the third quarter to 5.6 percent of GDP from 6.7 percent at the same point a year earlier, while neighboring Spain has promised to slash its deficit to 3 percent by 2014 from a blowout shortfall equal to 9.4 percent of output last year.
Germany expects its budget to be in balance this year, two years ahead of schedule, but IMF head Christine Lagarde has suggested that Berlin ease up a bit in its drive for healthy finances.
“Germany ... and others ... can allow themselves to go a little more slowly than others in the push to straighten out their public finances,” Lagarde told the German weekly Die Zeit in comments published last week.
Her call echoed other European voices that are now arguing for greater emphasis on growth rather than austerity measures.