FRANCE has presented a plan to get its public deficit back under the EU limit by 2014, having decided to let debt grow further as it tries to jumpstart a sputtering economy.
The plan to bring the deficit below 3.0 per cent of gross domestic product (GDP) is based on a broad effort that includes higher taxes along with savings within the social security system.
The "stability program" was released by the finance ministry and based on what the government termed a "realistic" economic growth forecast of 0.1 per cent this year and 1.2 per cent in 2014, which it maintained would allow the public deficit to be cut to 2.9 per cent of output next year.
"What I want is fiscal sobriety - essential for debt reduction in the medium term but also for growth without which there won't be deficit reduction," President Francois Hollande said in a speech.
The growth forecasts have been questioned however both by the International Monetary Fund and a new independent French high council for public finances, with the IMF forecasting on Tuesday that the French economy would contract by 0.1 per cent this year before expanding by a slight 0.3 per cent in 2014.
France was initially to have cut the deficit to 3.0 per cent of GDP already this year, but has asked for more time owing to weak growth which has pushed the estimated 2013 public deficit figure up to 3.7 per cent, compared with 4.8 per cent in 2012.
Under EU rules, eurozone members are expected to run public deficits of no more than 3.0 per cent of GDP, and are supposed to work towards a balance, or even a surplus in times of economic growth.
Without an EU extension, France could trigger procedures that might result in sanctions.
The government is now pledging to bring the public deficit down to 2.9 per cent next year, with Hollande having ruled out making more sharp spending cuts to reach the target this year.
Under the program, public debt is expected to reach a record peak of 94.3 per cent of GDP in 2014 before beginning to decline a year later than initially planned.
The European Commission, which will vet the plan once French MPs have approved it, said it would take a close look at new commitments by the French government.
German Chancellor Angela Merkel said: "We wish France success because France is key to the eurozone as a whole."
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