France’s Finances Are ‘No Better’ Than Spain’s, O'Neill Says
Government finances in AAA-rated France, the euro region’s second-biggest economy, are no better than in Spain, which is fighting speculation that it may succumb to the debt crisis, said Jim O’Neill, chairman of Goldman Sachs Asset Management.
“Their debt position is no better than Spain and possibly worse,” O’Neill said today in a Bloomberg Television interview in Nanjing, China, where he was attending a meeting on global monetary issues sponsored by the Group of 20 nations.
His comments underscored the urgency for French President Nicolas Sarkozy to curb a gross debt load that the International Monetary Fund predicts will climb to 86.4 percent of gross domestic product this year. Spain’s debt will be 68.4 percent, according to IMF projections published in January.
Sarkozy, who faces an election in April 2012, has sought to balance investor pressure for deficit reduction with the need to foster growth and counter joblessness that’s stuck near a seven- year high. Restraint on health-care and pension payouts slowed spending growth in 2010 even as Sarkozy initiated his “grand loan” investment plan to spur competitiveness. He vowed again today to slash the deficit to the European Union limit of 3 percent of GDP by 2013.
France’s budget shortfall last year amounted to 136.5 billion euros ($194 billion), or 7 percent of GDP, national statistics office Insee said in a statement today from Paris. That compares with the 7.5 percent the government expected in February and the 8.5 percent originally planned. The deficit was 7.5 percent in 2009.
Spain’s Deficit
Spain, which had a deficit of 9.2 percent last year, is rated Aa2 by Moody’s Investors Service, in part because of concern the government may have to inject capital into some of the country’s banks. The lenders may need as much as 50 billion euros, Moody’s estimates.
Spain is trying to avoid contagion from neighboring Portugal’s debt woes. The cost of insuring Spanish government debt from default rose to the highest in two weeks today as Caja de Ahorros del Mediterraneo was forced to seek a state bailout after three savings banks rejected its merger plan.
France’s gross debt rose to 1.59 trillion euros or 81.7 percent of GDP in 2010, from 78.3 percent in 2009. Net debt rose to 75.9 percent from 71.3 percent, Insee said today.
“France is not only meeting its deficit commitments, it’s going beyond them,” Finance Minister Christine Lagarde said today on Radio Classique. “It proves all of our reforms are beginning to bear fruit. We outperformed in 2010. I hope we’ll be able to continue to do better.”
To contact the reporter on this story: James Hertling in Nanjing, China at jhertling@bloomberg.net; Stephen Engle in Nanjing, China at sengle1@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
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