France and Spain miss cost cut targets as Eurozone debts grow

City A.M. Reporter
FRANCE and Spain fell short of their budget deficit goals last year, data showed yesterday, although the overall fiscal picture for the Eurozone improved.

France’s 2012 budget deficit was 4.8 per cent of economic output, statistics office Eurostat said in the final reading of all 27 countries’ public accounts. It compared with a target of 4.5 per cent.

Spain’s budget shortfall was 7.1 per cent, excluding bank recapitalisation, higher than the government’s 6.98 per cent official year-end reading and well above its initial target of 6.3 per cent.

Overall, the 17-nation currency bloc looked much better off at the end 2012, however. Its combined fiscal deficit was 3.7 per cent of gross domestic product, compared with 4.2 per cent in 2011 and 6.5 per cent in 2010.

Debt as a percentage of GDP in the Eurozone hit a record 90.6 per cent at the end of 2012, up from 87.3 per cent in 2011. For the wider EU, this figure drops to 85.3 per cent.

Budget cuts are at the centre of the Eurozone’s strategy to overcome a three-year public debt crisis but they are also blamed for a surge in unemployment.

Both Spain and France are set to get more time to reach EU-mandated targets of three per cent.

“We need to combine the indispensable correction in public finances, huge deficits, huge public debt... with proper measures for growth,” EC president Jose Manuel Barroso said in a speech in Brussels yesterday before the data was released.