Sapin Says Growth Pickup May Help France Meet Deficit Targets
French Finance Minister Michel Sapin said the economy may grow faster than projected this year, helping the government to meet European Union budget-deficit targets.
“We’ll do better in 2014, slightly better” than the 0.9 percent growth now forecast by the government, Sapin said in an interview in Washington, where he was attending International Monetary Fund meetings. “For 2015, I don’t have figures. You see our objective -- it’s to do better than what people are expecting,” he said. “That’s our whole strategy.”
President Francois Hollande’s new government is seeking to regain economic credibility after his Socialist Party suffered a crushing defeat in municipal elections. Sapin’s remarks indicate officials are looking for ways to stimulate growth while meeting budget pledges that Hollande put in doubt last month.
France’s deficit amounted to 4.3 percent of gross domestic product in 2013. Under EU economic rules put in place after the sovereign debt crisis, Hollande promised last year to trim the shortfall to 3.6 percent this year and 3 percent in 2015, the EU limit. In agreeing to the 2015 target last year, the EU granted France its second delay since the debt crisis.
Polls published last weekend showed that a majority of voters are ready to make an effort to narrow the deficit and that Hollande’s popularity continues to slump. His approval fell five points in the past month to 18 percent, according to an Ifop poll for Journal du Dimanche. Ifop surveyed 1,909 adults between April 4-12. No margin of error was given.
To revive both his popularity and the economy, Hollande has pledged to cut taxes and payroll charges on companies and to trim levies for households. Fabrice Montagne, an economist at Barclays Plc in Paris, estimates that the government needs to find about 20 billion euros ($28 billion) to fund those promises and also meet the EU targets.
The IMF estimates that the French economy will expand 1 percent in 2014 and 1.5 percent in 2015. Improving growth won’t be easy, according to Montagne.
“Just achieving 1 percent this year will already be quite good,” he said. “Then getting enough to bring the deficit to 3 percent in 2015 -- that would be very big.”
Sapin cautioned that the economy isn’t yet strong enough to reduce jobless claims from a record 3.3 million.
“Growth has restarted at too weak a pace,” he said. “Our objective is to do more, go further.”
The finance minister, who has held the post for less than two weeks, also said the strength of the euro has had certain consequences, though he hasn’t raised the subject directly in meetings with European Central Bank President Mario Draghi.
“It’s not at the heart of our concerns,” Sapin said. “Our concern is growth in Europe. It is restarting. The whole world is watching us, saying things are going much better.”
Asked about the risk of deflation, he said it was “not a major preoccupation” as it was more a matter for countries such as Spain, Portugal and Greece.
“It is fundamental to diminish debt, both in France and elsewhere,” he said. “So it remains fundamentally our objective, even to go below 3 percent” in 2015-2017, he said.