France’s solid growth could aid deficit reduction, Le Maire says

FRANCE’S stronger-than-expected growth could help the country close the budget deficit, caretaker Finance Minister Bruno Le Maire said.

Gross domestic product rose 0.3 per cent in the three months through June and statistics agency Insee revised up its estimates for the two previous quarters. Even with zero growth in the remainder of the year, France will still meet the government forecast of a 1 per cent expansion in 2024 that grounds fiscal plans. 

“It can of course have a positive impact on deficits,” Le Maire said. “The first pillar of my strategy to reduce the deficit is growth, and it’s there, so I’ve fulfilled my mission.”

The outgoing finance chief said the second pillar is to continue with economic reforms including the pension overhaul, and the third is reducing government spending. 

Investors are watching France’s public finances closely after last year’s budget deficit came in much wider than expected and as the country is in a political impasse after legislative elections returned a hung parliament. 

The left bloc that won the largest share of seats in the National Assembly has pledged vast increases in spending and taxes, although it is far short of an absolute majority. President Emmanuel Macron has said he won’t name a new prime minister and government until after the Olympics, which are being held in Paris through Aug 11.

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Le Maire said he is preparing a budget for his successor that will keep the country on course to bring the deficit under 3 per cent of economic output by 2027. 

“The sooner we have a government the better because uncertainty is not good for investors or business – they need visibility,” Le Maire said. BLOOMBERG