Tuesday

23rd Jan 2018

France set to smash euro rules

France looks set to smash the rules underpinning the euro, according to new figures published yesterday by the Finance Ministry.

Its budget deficit - tax receipts less public spending - could be as high as four percent of its gross domestic product (GDP) in 2003. But EU rules state that deficits may not exceed three percent of GDP.

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The new figures show that the French deficit is ballooning.

The deficit for the first half of this year was 38 percent higher than at the same time last year. Spending was up a fraction but tax income for the French government was down by 6 percent - hit by a combination of slow growth and high unemployment.

Corporate tax was especially affected by the economic slowdown - with an 11 percent drop.

This all points to a deficit approaching 4 percent, although the government is sticking for the moment to its projection of 3.4 percent.

France broke this set of rules - known as the Stability and Growth Pact - in 2002 and is certain to break them again this year.

If France does not adhere to the Pact next year, it could be fined up to 0.5 percent of its GDP - in France's case, about 7.5bn euros.

Officials in France have repeatedly stated that they are committed to the aim of reducing the deficit below the limit. However, large tax cuts projected for next year - as much as 3 percent, according to Le Monde - will make that task considerably harder.

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