PARIS: The French government’s public deficit reduction target for 2017 would be “very difficult” to achieve, as it underestimated a rise in public spending and set overly optimistic tax income forecasts, France’s auditing court said.
“For 2017, the government targets a reduction in the public deficit to 2.7 per cent of GDP. This target will be very difficult to achieve,” the court said in its annual report.
The state’s payroll bill would rise by more than three per cent this year, as much in one year as in the whole 2011-2016 period, the court added.
President Francois Hollande’s Socialist government had to increase spending on security following deadly Islamist attacks in Paris and Nice in 2015 and 2016, and it has raised public sector workers’ salaries as the presidential election looms.
The court also offered a less than rosy assessment of the government’s past efforts to cut France’s public deficit, the fourth-largest in the EU after Spain, Portugal and Britain.
“The un-ambitious 2016 deficit target of 3.3 per cent should be met,” the court said, noting that it was for the most part the result of rock-bottom borrowing costs due to the European Central Bank’s bond-buying program.
Over the 2012-2016 period more than 40 per cent of France’s public deficit reduction was attributable to the drop in interest rates, the court said.
In a written response added to the court’s report, the government said it did not share the court’s view and had included in its budget plans the risks flagged by the court, including a 75 basis points increase in interest rates.
