Baroin: France must hit target or risk a crisis

 
City A.M. Reporter
SCALING back plans to balance France’s budget by 2016 would risk a market backlash, its finance minister said yesterday, taking aim at the opposition Socialists’ economic programme as a presidential election nears.

Unveiling multi-year spending forecasts, President Nicolas Sarkozy’s conservative government confirmed it aimed to cut the public deficit to an EU-imposed limit of three per cent of GDP in 2013 and to zero in 2016, from an estimated 4.4 per cent this year.

Sarkozy’s Socialist challenger Francois Hollande, who polls show is on track to win a 6 May head-to-head by as much as 10 percentage points, has also said he aims to balance the budget – but not until 2017 and only if growth allows leeway for deficit cutting.

France has not run a balanced budget since 1974.

Finance minister Francois Baroin noted that Spain was coming under market pressure for loosening its 2012 deficit target.

“What would happen if we stray from the 2016 target? It would be a serious risk, to say the least, for the perception of France’s capacity to attain its deficit-reduction targets,” he told parliament.

Citing returning household confidence, the government yesterday confirmed its forecast for growth this year of 0.7 per cent, 1.75 per cent in 2013 and two per cent in each following year up to 2016, when the budget should balance.