France may need to take “significant” steps to bring its budget deficit under European limits next year, the European Commission said, curbing new President Francois Hollande’s room to spur the economy.
The commission, the enforcer of euro fiscal rules, said the pressure is for savings in 2013 since the 2012 budget Hollande inherited from predecessor Nicolas Sarkozy is on the right path.
France is under a European Union order to narrow the budget shortfall to 3 percent of gross domestic product next year or potentially face sanctions as part of a crisis-driven crackdown on deficits. The deficit was 5.2 percent of GDP in 2011.
“Although this year’s target of 4.4 percent of GDP appears achievable, the distance to the 3 percent of GDP threshold remains significant,” the commission said in policy recommendations released today in Brussels. “The consolidation strategy remains to be further specified and correcting the excessive deficit by 2013 may require additional efforts.”
France’s economy was stagnant in the first quarter, giving weight to Hollande’s campaign pledges to stimulate growth while leaving him with little fiscal leeway to make good on those promises.