French growth to miss target this year: Fabius

Wednesday, 20 February 2013 00:00 - - {{hitsCtrl.values.hits}}

PARIS (Reuters): France’s economy will grow significantly more slowly this year than the government has forecast, foreign minister Laurent Fabius said on Tuesday, days after he declared that the deficit target was also likely to be missed.

Fabius said growth would be no better than around 0.2 to 0.3% this year. The government has acknowledged it will have to lower its forecast of 0.8% for the euro zone’s second-biggest economy but has yet to give a precise figure.

“Now, since on the European level things don’t seem to be going so well, we will be obliged to lower it,” Fabius told RTL radio.

A shortfall in growth is at the heart of concerns that France is falling short on its targets for fiscal tightening. Additional savings will be required at both the national and regional levels, Fabius said, without giving details.

It was the second time in two weeks that France’s second-highest ranking minister whose remit covers European affairs, appeared to pre-empt an announcement by the government, which has been slow to acknowledge it will need to lower its 2013 growth forecast.

After Fabius declared last week that France’s goal of a budget deficit of no more than three% of GDP was probably out of reach, Prime Minister Jean-Marc Ayrault acknowledged that his foreign minister was right.

As the economy veers close to recession – it contracted 0.3% in the final quarter of 2012 – experts including France’s Court of Auditors believe the 3% deficit target is untenable. France is anxious to maintain its credibility with its EU partners, ratings agencies and financial markets as its economy stalls, complicating the task of keeping the budget gap to the EU ceiling of 3% of economic output.

On Monday, Finance Minister Pierre Moscovici said it would be “difficult” to reach the government’s growth target of 0.8% this year, but did not give a precise figure. He said France would wait for the European Commission to provide new macro forecasts on Friday before determining whether to adjust its fiscal plans for 2013.