France's Hollande reaffirms 2013 deficit target

Reuters News
Posted: Dec 21, 2012 2:49 AM
France's Hollande reaffirms 2013 deficit target

PARIS (Reuters) - French President Francois Hollande reiterated on Friday that his government was targeting a reduction of the public deficit in 2013 to three percent of GDP despite new official data showing economic growth way below forecast.

Hollande told Europe 1 radio he also expected that French unemployment would only begin to fall by late 2013 despite what he said would be a "difficult year" for the economy.

"There's no recession, not in France," Hollande said. "But it will be difficult because when we have nearly zero growth in the first half of the year, unemployment will keep rising."

The French economy will eke out growth of only 0.1 percent this year, dropping from 1.7 percent in 2011 and missing the government's forecast for 0.3 percent, national statistics office INSEE estimated late on Thursday.

More worrying, INSEE said the outlook would improve only marginally heading into 2013, estimating growth of 0.1 percent in both the first and second quarters.

The weak economic momentum raises the chances the economy will grow less in 2013 than the 0.8 percent forecast the Socialist government has built its budget on.

Asked if he still aimed to cut the deficit to 3 percent of output next year, Hollande said: "That's our target and when you set a target the aim is to reach it."

Hollande's comments came after French employers and trade unions announced overnight that they had failed to reach an accord on labor market reform seen essential to unlocking more growth potential from the euro zone's second largest economy.

The two sides are set to hold new talks starting January 10, extending the initial year-end deadline Hollande originally set for what he said must be an "historic" accord.

"We must not miss this opportunity ... everyone must assume their responsibilities," he said.

(Reporting by Leigh Thomas and Mark John; editing by Vicky Buffery)