France lowers growth forecast for 2014

Finance Minister Pierre Moscovici said Wednesday that France will overshoot its deficit target for this year and next as economic recovery will not be as robust as expected.   

French Prime Minister Jean-Marc Ayrault. REUTERS/Gonzalo Fuentes

France's 2013 public deficit will come in at 4.1 percent of GDP, higher than the 3.9 percent agreed with the European Union.

Moscovici said the 2014 deficit will come in at 3.6 percent and that France plans to push it back under the EU ceiling of 3.0 percent of GDP by its Brussels imposed deadline in 2015.

French Prime Minister Jean-Marc Ayrault also announced Wednesday that France is to make unparalleled cuts amounting to 15 billion euros to slash its crippling public deficit.

“In this budget €15 billion worth of savings are to be made,” Ayrault said. “This is an unprecedented effort but at the same time we will save our social model.”

This is one billion euros more than previously indicated by the Socialist government.

Ayrault said there would be no additional increases in value added tax (VAT) other than what was already planned to leverage the purchasing power of households.

The majority of cuts, 9 billion euros, will appear in government spending at a regional and national level, and a further six billion euros will be axed from the country’s welfare system, according to French newspaper Le Monde.

Ayrault said that government wants "to do everything possible to consolidate growth. It's a budget to kickstart job creation, that's the main battle."

The draft budget is set to be presented to the cabinet on September 25.