France fails to keep EU budget promises in 2007

The euro zone’s second biggest economy ran a budget deficit of 2.7% of gross domestic product, above the 2.4% goal fixed by President Nicolas Sarkozy’s government and up from 2.4% in 2006. The government blames the economic slowdown for the slippage and has said it will revise up its 2008 public deficit projection from 2.3% because it has cut its growth forecast for this year to 1.7-2.0% from 2.0-2.5%.

Friday’s data revised up fourth quarter GDP growth to 0.4% from a first estimate of 0.3% but full year growth was left unrevised at 1.9%, below the 2.0-2.5% forecast on which the government had based its 2007 budget. The deficit figures remain below the EU’s cap of 3% of GDP and France is not the only euro zone country which is having to downgrade its growth hopes for this year in the face of a global credit squeeze, a US economic slowdown, a strong euro, and high oil prices. But it is likely to win a less sympathetic hearing over its budget slippage because other EU states had branded its fiscal goals insufficiently ambitious and the European Commission had deemed its initial growth estimates overly optimistic. (Reuters)