France lowers deficit forecast, vows no new taxes

BRUSSELS - France's finance minister cut the country's deficit forecast for 2015 on Wednesday (3 November) adding that Paris will be well within the EU's 3 percent limit by 2017.

Michel Sapin told a press conference that he had revised France's expected deficit down to 4.1 percent from the 4.3 percent previously forecast, as a consequence of extra savings worth €3.6 billion announced by Sapin in October.

The extra money does not come from additional spending cuts but instead from lower interest expenses from servicing France's debts, a reduction in its contributions to the EU budget, and extra tax revenues from a clampdown on tax evasion and a new tax on second homes.

"We have revised the 2015 deficit ... without touching the fundamentals of French economic policy," Sapin told reporters.

The announcement is the latest piece of brinkmanship between Paris and Brussels over France's budget deficit.

Along with Italy and Belgium, Francois Hollande i's government was given a three month stay of execution by the European Commission last week, with the EU executive warning that failure to implement further cuts could leave it with no alternative but to impose sanctions which could, theoretically, amount to 0.2 percent of GDP.

Of the three, France has been singled out as the main laggard in implementing the EU's revamped economic governance rules.

Having originally been instructed to bring its deficit below 3 percent in 2013, France was given a two-year extension only for Sapin to announce this summer that the target would not be reached before 2017.

Sapin maintains that France will not put in place further austerity measures beyond the €50 billion package of cuts it plans over the next three years, arguing that new cuts could choke off the country's nascent economic recovery. He also vowed not to impose any new tax rises before the next presidential elections in 2017.

The French economy has grown by just 0.3 percent over the first nine months of 2014, while the Commission and French government have forecast growth rates in 2015 of 0.7 percent and 1 percent respectively.