France will not need to introduce austerity measures in response to increased debt exposure from the euro zone's new rescue plan for Greece, its finance minister said on Saturday. Francois Baroin said in an interview with French daily Le Monde that the government would be able to maintain its deficit reduction targets and would not be "impoverished" as a result of the bailout.
Prime Minister Francois Fillon said on Friday that the package for Athens agreed by eurozone leaders late on Thursday would increase France's debt by some 15 billion euros by 2014, though it would not otherwise directly impact its public finances. Baroin, who recently succeeded IMF-bound Christine Lagarde, told the newspaper: "France is participating in the form of a guarantee.
"...Since last year, European statisticians have told us that the debt of the European Financial Stability Facility (bailout fund) should be linked to each country according to what it guaranteed. "Beyond that accounting impact, France doesn't need to borrow more and our deficit isn't impacted. Neither the EFSF nor obviously France will be impoverished by this plan."
Facing an election in 2012, the government aims to cut the public deficit from an estimated 5.7 percent of GDP this year to meet an EU-imposed limit of 3 percent in 2013. In a deal brokered by French President Nicolas Sarkozy and German Chancellor Angela Merkel, the leaders of the 17-nation eurozone committed an extra 109 billion euros in government money for the Greek debt rescue. The increase in debt raises the risk that France may overshoot the government's debt targets, which foresee a peak at 86.9 percent of gross domestic product (GDP) in 2012.
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