Sarkozy downbeat about growth but vows deficit cut
FRENCH President Nicolas Sarkozy yesterday downgraded the government's forecast for 2011 growth, but said that cutting the public deficit to 6pc of gross domestic product next year remained a major objective, whatever the level of growth.
The French government now expects economic growth of 2pc in 2011, compared with a previous forecast of 2.5pc that was considered unrealistic by many economists.
The new 2pc forecast for 2011 is in line with the view taken by the Organisation for Economic Co-operation and Development, Mr Sarkozy said in a statement. But the statement did not explain why the government itself had decided to cut the forecast and it is still above the International Monetary Fund (IMF) expectation of 1.6pc GDP growth in 2011.
"The reduction of the deficit should be obtained by cutting spending as a priority. Neither income tax, nor VAT, nor business taxes will be raised," the statement said.
The government targets cutting the public deficit from an expected 8pc of GDP in 2010 to 6pc in 2011 and 4.6pc in 2012, before reaching 3pc in 2013.
The statement follows a meeting at Mr Sarkozy's summer residence yesterday morning with key members of the government, including Finance Minister Christine Lagarde, Prime Minister Francois Fillon and Budget Minister Francois Baroin.
France has recorded growth rates of 0.2pc and 0.6pc respectively in the first and the second quarter this year, according to statistics published a week ago by France's National Institute of Statistics and Economic Studies.
The government had estimated a growth rate of 1.4pc for 2010 and 2.5pc for 2011.
"Given the rebound in economic activities, the objective of a 1.4pc growth will be reached or exceeded for the whole year of 2010," Mr Sarkozy said.
However, the forecast of 2.5pc has been judged "too optimistic" by the IMF, which expects France to show weak growth at 1.4pc for 2010 and 1.6pc for 2011.
Economists said the political austerity measures aimed at reducing the deficit announced by the French government would have an impact on the economic growth for the next year.
The French government is expected to present its financial bill for 2011 next month.
In early July, France's National Assembly passed the guidelines of Budget 2011, aiming to reduce the public deficit from 8pc to 6pc.