High debt, slow growth euro crisis is to dominate Europe for at least a decade. The failure of France as an economic power is the blueprint for what is to become of the EU.
Crisis-hit France admitted it would suffer from slow growth and high budget deficits for the next three years at least, when it unveiled a gloomy annual budget on Wednesday, LiveTrading reported Friday.
Finance Minister Michel Sapin told reporters that France’s budget deficit would stay above the European Union’s maximum limit until 2017, blaming a sluggish eurozone economy and unusually low inflation.
The deficit, which EU rules state must be below three percent of total economic output, will reach this target only in 2017, Sapin said, with a forecast of 2.8 percent.
France had promised Brussels it would get below the three-percent limit next year, but in a dramatic about-turn earlier this month, pushed back the commitment by two years.
Paris has “lived up to its commitments,” Sapin insisted.
“The pace of deficit reduction has been adapted to the (economic) situation,” the finance ministry said in its budget statement.
“The French people will not be asked to make additional efforts because, although the government is aware of the seriousness of the budgetary situation … it refuses to impose austerity.”
The European Commission, which oversees European countries’ budgets, is scheduled to deliver its judgment on France’s economic woes next month.
In a twist of irony, it will almost certainly be former French Finance Minister Pierre Moscovici — appointed EU economic affairs commissioner — who will have to decide on the consequences for France for breaking the rules.
Sky-High Unemployment
France is battling through a deep economic crisis, with zero growth in the previous two quarters and sky-high unemployment.
Sapin forecast a very gradual recovery for the French economy, which he said would reach a level of two percent growth only in 2018.
The economy is projected to grow by only 0.4 percent this year, recovering progressively to 1.0 percent in 2015, 1.7 percent in 2016 and 1.9 percent in 2017.
The minister said the economy would then grow by two percent in 2018 and 2019.
“The economic prospects in France and in Europe are not the same that we were promised a few months ago,” Sapin admitted.
However, only hours after he presented the budget, the High Council of Public Finances attacked the forecasts for being too optimistic.
The projections for 2006 and 2017 are based on “too favorable hypotheses for the international environment and investment,” the council said in a statement.
