France unexpectedly reined in its 2010 public deficit to seven percent of output while debt hit a record 81.7 percent, the government said Thursday, vowing to meet EU budget limits within three years. "It is a really remarkable result," Economy Minister Christine Lagarde said on the radio.
It "essentially reflects a more dynamic recovery of the economy and jobs" than expected, she added in a joint statement with Budget Minister Francois Baroin. The figures from the national statistics agency INSEE showed a 2010 deficit - the shortfall of revenues to spending in public budgets - of 7.0 percent, down from 7.5 percent in 2009 and lower than a forecast of 7.7 percent.
Meanwhile public debt rose in 2010 to 1.591 trillion euros ($2.255 trillion) or 81.7 percent of gross domestic product, from 78.3 percent in 2009. The government had forecast higher debt of 82.9 percent for 2010. France has for years run high deficit and debt levels and these soared as the government spent billions on stimulus measures to ensure recovery from a recession brought on by the 2008 financial crisis.
INSEE said that public spending eased last year with the winding down of the stimulus measures and revenues picked up. The ministers' statement added that business tax reforms had proved less costly than forecast. The latest figures are far above the limits set by EU treaties of no more than a three percent deficit and 60 percent debt level, but France hopes the better-than-expected deficit figure will help it get under the limit in 2013.
The government this month unveiled plans for a constitutional amendment that would oblige France to work towards balancing the state and other public budgets. The ministers vowed Thursday that France would not only meet the three-percent limit but get the deficit well inside it.
"These public finance results strengthen our strategy of bringing health to our public accounts," said the ministers' statement. "The government is therefore resolutely determined to... bring the public deficit below three percent in 2013." Speaking on RMC radio, Baroin added that through its deficit-cutting programme "we will more quickly reduce our debt," hinting that France would beat its debt forecast of 86.2 percent of output for this year. "The real question is what is done in 2012," said Michel Martinez, an economist with major French bank Societe Generale, warning that the government faces "politically painful" measures ahead of an election in spring next year. "To reduce such a big structural deficit, it will be necessary to cut spending and raise taxes," he said.
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