Paris/Athens: President Francois Hollande acknowledged on Tuesday that France will miss its 0.8 per cent 2013 growth target, hours after his foreign minister said the growth rate could come in at less than half that level.
Laurent Fabius told RTL radio that French growth this year would be no better than around 0.2 to 0.3 per cent.
It was the second time in a matter of days that Fabius, a prime minister in the 1980s and one of the most senior members of the government, let the truth slip about France’s economic outlook after revealing last week that the deficit goal would be missed.
“Since on the European level things don’t seem to be going so well, we will be obliged to lower it,” Fabius said of the growth target.
Hollande’s confirmation that the target would be missed — in a statement made during a visit to Greece — will add to concerns that the Eurozone’s second-largest economy is on the brink of recession.
Data last week showed it shrank in the last quarter of last year.
“For 2013, everyone knows we will not reach the 0.8 per cent that was predicted,” Hollande told a joint news conference with Greek Prime Minister Antonis Samaras.
He said France would wait for the European Commission’s new economic outlook, due on Friday, before issuing a new target at the end of March.
The admission that the growth goal will be missed, having already been cut in September from an initial target of 1.2 per cent, also pushes France’s deficit-cutting goals further out of reach.
The government has defended its growth and deficit goals for months against misgivings from economists, as it battles to maintain credibility with EU partners and rating agencies, but admitted last week it would fail to cut the 2013 public deficit to within an EU ceiling of 3 per cent of GDP.
“We’re one of the countries that today, in terms of growth plans or in any case activity, is in the least bad situation,” Hollande said. “But we’re far from our goals.”
French benchmark 10-year bond yields, however, were barely changed at 2.26 per cent. For all its economic problems, investors still treat France as a core Eurozone economy.
More spending cuts loom
Fabius said that the missed target meant additional savings would be required at both the national and regional levels, without giving details.
On Monday, Finance Minister Pierre Moscovici would not comment on a media report the Socialist government may add some ¤5 billion (Dh24.5 billion) onto the ¤60 billion in spending cuts it is already targetting over five years.
He said Paris could tweak its fiscal plans after talking to the Commission about its new outlook.
Conservative politicians accused the government of bungled communications, after Fabius appeared for the second time to pre-empt an official revision to economic targets which would usually come from the president, prime minister or finance ministry.
Prime Minister Jean-Marc Ayrault — who was forced last week to respond to Fabius’s remark on the deficit and acknowledge the minister was correct — played down the muddle.
“There is no cacophony,” Ayrault told reporters in Paris.
“The European Commission will announce its growth estimates for France and each European country on Friday. The government will then announce the decision it will take.”