French growth this year will fall short of the government’s goal and the country won’t meet its budget-deficit target, the European Commission predicted.
France’s gross domestic product will expand 0.1 percent, the commission said, compared with the government’s 0.8 percent forecast. This year’s deficit will be 3.7 percent of GDP and not the 3 percent target set by the government, it said.
French President Francois Hollande and Finance Minister Pierre Moscovici have telegraphed in recent weeks that the euro area’s second-largest economy would miss its targets, blaming slowing economies elsewhere in Europe. Moscovici has said he’s opposed to further tax increases to hit nominal deficit targets, saying it’s more important to focus on structural measures that ignore swings in economic activity.
“If we have a deeper recession, we’ll have an even tougher time hitting our targets,” Moscovici told journalists Feb. 18 in Paris. “We should not add austerity to the recession that’s already out there.”
The French government has said it will present its own updated forecasts in late March or April.
French growth will still be better than the euro area as a whole, which is expected to shrink 0.3 percent.
The French economy was flat last year and will grow 1.2 percent in 2014 with unchanged policies, the Commission said.
Unemployment will rise to 10.7 percent of the workforce this year and to 11.0 percent next year from 10.3 percent in 2012, the Commission said. Hollande is confronting joblessness at a 15-year high as companies from carmaker PSA Peugeot Citroen (UG) to Goodyear Tire & Rubber Co seek to close factories.
Hollande’s 2013 budget included 20 billion euros of tax increases spread evenly between companies and individuals, including higher taxes on wealth, capital gains and inheritance. A two-year 75 percent surcharge on income over 1 million euros ($1.35 million) was ruled unconstitutional by the country’s top administrative court.
Hollande has called on government departments to tighten their belts after pledging to cut public spending by 60 billion euros over five years.
Moscovici says those measures have cut France’s structural deficit by two percentage points of GDP.
French government debt will climb to 93.4 percent of economic output from 90.3 percent, the Commission forecast.
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