French deficit "probably at 3.7%" of GDP this year: Hollande
2013-03-12 15:58:45
French President Francois Hollande publicly renounced on Tuesday his government's goal of cutting the public deficit to the EU limit of three percent of output this year, saying that it would probably amount to 3.7 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, central France.
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 noted that France currently has "the lowest interest rates in its history".
The government had already abandoned its target of reducing the public deficit to 3.0 percent of gross domestic product (GDP) this year, in large part because the economy is now expected to grow by just 0.1 percent in 2013, rather than by 0.8 percent as initially estimated.
The European Commission has indicated that it may give France some slack in achieving the deficit target, and the International Monetary Fund has recently warned EU countries that cutting deficits too fast was harming growth.
Hollande is targeting a balanced budget in 2017 and he has repeatedly argued for a greater emphasis on growth measures as a means to raise revenues rather than pursuing fiscal discipline as called for by Germany and some other northern Eurozone nations.
Hollande is walking a fine line however to avoid giving financial markets the impression that France will abandon efforts to get its finances in order, which would result in higher borrowing rates that would make it still harder to reduce the public deficit.
On Tuesday, the French president warned that "there will be some brave choices to be made" regarding social benefits to ensure crucial programmes such as pensions, and insisted that he would not shy away from such decisions.
"We note today that the provisional deficit for our retirement programmes could reach 20 billion euros (US$26 billion) by the end of 2020," Hollande said.
He added that French employers, insurers and unions would be asked to stand by solutions within the framework of ongoing talks aimed at ensuring that pension payments remained sustainable and fairly distributed.