France to challenge 2016-17 EU structural budget targets

[PARIS] France will target a smaller reduction in its structural budget deficit in 2016 and 2017 than called for by the European Commission in order to preserve growth, its budget minister said on Tuesday.

Christian Eckert said the amount of effort asked for regarding the structural deficit - which strips out the effects of the economic cycle - was too high, potentially leading to new friction between France and its eurozone peers after Paris won a two-year reprieve on its headline deficit.

"The Commission is asking us for a structural effort that is, I believe, oversized: 0.8-0.9 (per cent) in 2016 and 2017," Mr Eckert told journalists.

The French government will unveil its updated budget plans on Wednesday or Thursday before sending them to the European Commission. They are key to Paris making sure it continues to avoid EU sanctions on its fiscal slippages.

"The stability plan we will send will be close to the Commission recommendation without breaking (the return to) growth," Mr Eckert said. The government has so far been targeting reductions of 0.2 per cent of GDP in 2016 and 0.3 per cent in 2017.

As for the 2015 budget, Paris has promised to come up with as much as 4 billion euros (S$5.96 billion) in extra savings this week. Mr Eckert reaffirmed that this week's plan would indeed plug the gaps, without giving any details.

Separate plans to boost investment, which Prime Minister Manuel Valls will unveil on Wednesday, will include hundreds of millions of euros of fiscal measures, some of which will focus on encouraging businesses to write down investments at a faster rate.

The eurozone's second-biggest economy has repeatedly missed deadlines and budget consolidation targets. Its EU peers gave it more time last month to cut its headline deficit at a time of weak economic growth and low inflation.

REUTERS