The French government will stick with its commitment to narrow the fiscal deficit to 3 percent of economic output next year, President Francois Hollande said, promising the most drastic budget cuts in 30 years.
Hollande, speaking in Paris to the state auditors today, said the 33 billion euros ($42 billion) of savings needed to hit the target will include 10 billion euros of spending cuts.
“Part of our increased deficit comes from the crisis, but the crisis does not explain everything,” Hollande said. “The worsening of our public accounts is in large measure structural.”
The government is due to present its 2013 budget on Sept. 26. The deficit hit 5.2 percent of output last year and debt reached 90 percent, up from 1.6 percent and 60 percent respectively, 10 years earlier.
Hollande alluded to plans announced by the European Central Bank to buy the debt of troubled European countries, saying the move did not “absolve governments of their responsibilities.”
He also proposed a new body to oversee the implementation of the French government’s budget and its economic forecasts.
The new body, called the “Haut Conseil des Finances Publiques,” or “High Council of Public Finances,” would be led by the head of the state auditors and include four judges from the state audit body and four figures named by parliament.
“Too many governments have let themselves be guided by forecasts that were excessively optimistic,” Hollande said.
The French Finance Ministry this morning said the general budget deficit in the first seven months of the year widened to 63.8 billion euros from 59.1 billion euros in the same period a year earlier.
“The recent slowdown in economic activity seems to have taken a toll on the France’s budget data, particularly affecting corporate tax and income tax revenues, down from last year, while government spending is on an uptrend,” Thomas Costerg, an economist at Standard Chartered Bank Plc in London, said in an e-mailed comment. “It’s a clear wake-up call ahead of the draft of the 2013 budget.”