France Will Overshoot Deficit Limit

Thursday, July 07, 2005

France's public sector deficit will again breach the eurozone limit of three percent of gross domestic product (GDP) in 2005, despite recent government assurances of a 2.9 percent deficit, according to Le Monde.
The paper bases it's report on a "confidential study" from the French treasury, reporting that the trend at present points to a deficit of 3.5 to 3.6 percent in 2005 and 3.5 percent in 2006.
The French government had previously foreseen that the public sector deficit would not exceed 2.9 percent of GDP in 2005.
But it changed its forecast for 2006, saying that the deficit would be at 2.7 percent, compared with previous expectations for it to be around 2.2 percent.
If France's deficit exceeds the EU limit in 2005 and 2006, it will do so for the fourth and fifth consecutive years.
French public debt will also breach the EU limit of 60 percent of GDP, as it is set to hit 67 percent in 2007, according to Le Monde.
Under the EU's budget rules - the Stability and Growth Pact - no member state can run a budget deficit, calculated as tax receipts minus public spending, greater than three percent of GDP.
Governments that breach the three-percent limit can be fined, but no country has been punished so far despite repeated violations of the deal.
In practice, member states can get up to five years to correct their deficits.

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