France must hit deficit target and more by 2014: EU sources

The European Commission expects France to make a real effort to bring its public deficit down this year, and at all costs to "clearly below" the EU limit by 2014, an EU source said Tuesday.

Last week, the Commission, the EU's executive arm, forecast that the French economy would grow just 0.1 percent this year, well below the government's own estimate.

That sharp slowdown means French government spending will again outpace revenue, resulting in a public deficit at 3.7 percent of GDP this year, well above its 3.0 percent target and EU ceiling.

On Monday, French Finance Minister Pierre Moscovici said "in 2014, with a one year slippage, we will make the 3.0 percent level," adding that the budget for next year will be based on that figure.

The EU source said the Commission had been "very surprised" by Moscovici's comments which implied that the 3.0 percent target for 2013 had simply been dropped.

France still needed to do all it could this year to prevent its deficit reaching the 3.7 percent estimate, the EU source said.

EU Economic Affairs Commissioner Olli Rehn has effectively agreed to grant France an extra year on the deficit but at the same time, the 2014 deficit needs to "be clearly below 3.0 percent," the source noted.

Other EU sources said France would have to arrive at a deficit of between 2.5 percent and 2.8 percent "because 2.9 percent would not be acceptable to Germany," the bloc's biggest economy and paymaster.

France, like most EU states, has overspent for years but the debt crisis has forced all governments to cut back sharply and hike taxes in an effort to stabilise very strained public finances.

French President Francois Hollande was elected last year on a promise that he would promote economic growth over austerity but the weakness of the state's finances leave him little room for manoeuvre.