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French spending watchdog sees risks to 2016, 2017 fiscal targets

[PARIS] France's modest public deficit reduction target for this year is within reach, but it is far from clear whether Paris can cut the deficit to 2.7 per cent of economic output in 2017, the public spending auditor warned on Wednesday.

France said in April it would cut its deficit to 3.8 per cent of GDP this year and to 3.3 per cent in 2016, before bringing it under the EU's cap of 3 per cent in 2017.

In its annual report on the euro zone's second-largest economy, the Cour des Comptes said the 2016 and 2017 targets were based on a savings plan of 14.5 billion euros per year for which the government had not provided enough detail yet.

Defence and unemployment spending especially risked overshooting the government's target, it said in a statement.

The auditor, whose role is to pass judgment on whether public money is being well spent, also said France's debt-to-GDP ratio would continue to rise even if these targets were met, making France vulnerable to any rise in interest rates.

Last year, the public auditor had correctly predicted the government would overshoot its budget deficit target of 3.8 per cent in 2014, which came in at 4.0 per cent, only 0.1 per cent lower than the year before.

France has exasperated many of its EU peers by repeatedly missing fiscal targets. It changed tack a few months ago by being more cautious in its forecasts.