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France says spending cuts keep 2014 deficit on target

[PARIS] France managed to cut state spending in 2014, which means the country likely met its public deficit target for last year, Finance Minister Michel Sapin told Reuters on Thursday.

The euro zone's second-largest economy has repeatedly missed fiscal targets and the 4.4 per cent public deficit-to-GDP ratio, even if respected, will be higher than initial pledges.

But at a time when France is under scrutiny from the European Commission over fiscal slippages, it is important for Paris to show that it has cut spending and that its latest target has been met.

Preliminary finance ministry figures published on Thursday showed state spending dropped by 3.3 billion euros in 2014 compared to 2013, excluding debt and pension costs.

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"It's the first time in such a significant way that the control and cutting of state spending has been translated into acts," Mr Sapin said.

"Everything at this point provides comfort for our forecast for a public deficit in 2014 of 4.4 per cent of GDP," he added.

Revenue also dropped last year, and the state deficit, which makes up only part of the overall public budget deficit scrutinised by Brussels, stood at 85.6 billion euros in 2014 against 74.9 billions of 2013.

The shortfall was however 3.4 billion euros lower than estimated in a revised budget law at the end of last year.

Finance ministry officials point out that 12 billion euros in an investment plan have been transferred to another part of the public administration and not spent, meaning the impact on the country's overall budget deficit will be smaller.

Final budget data for 2014, which includes local authorities and social security, will be published on March 26.

Initially, the 2014 budget, as voted by lawmakers at the end of 2013, targeted a public deficit of 3.6 per cent of GDP. But France said in September that weaker-than-expected growth meant that target could not be reached and revised it to 4.4 per cent.

The government hopes to cut the deficit to 4.1 per cent of GDP in 2015, largely through plans for unprecedented budget savings of 21 billion euros and thanks to lower borrowing costs.

It has pushed back to 2017 its ambitions to meet the EU target of cutting the public deficit to 3 per cent of GDP.

The European Commission said this week that public investment and structural reforms could win some leeway for countries breaking EU budget rules, reducing the likelihood of tough penalties on France for its fiscal slippages.