France will likely breach European Union borrowing limits next year as the economic slowdown hits growth, Prime Minister Francois Fillon said in a television interview broadcast late on Monday. Fillon said he expected the French economy to grow by a little over 0.5 percent this year, but it was impossible to say yet whether 2009 would see weak growth, zero growth or recession.
"We will have a bit more (budget) deficit ... which the euro zone stability pact foresees because it foresees that in exceptional cases, one can go beyond 3 percent," Fillon said in the interview broadcast by state television channel France 2. The French government has been forecasting a budget deficit of 2.7 percent of gross domestic product for 2008 and 2009, just inside the EU's 3 percent limit. But ministers including Fillon have signalled that the forecast would be revised as the effects of the global economic slowdown become clearer.
"The important thing, obviously, is not to go too far beyond the 3 percent. So we will have a bit more deficit than forecast which is what Budget Minister Eric Woerth is going to announce in a few days," he said. The comments, recorded on Friday, were broadcast on the same day the European Commission cut its forecast for French economic growth to zero in 2009 and only 0.8 percent in 2010.
Fillon indicated that the government may have to at least halve its own current growth forecast for 2009 of 1 percent, which would put pressure on the deficit forecast. "When we have all the figures, we will readjust growth forecasts. Will it be 0.5, will it be 0.3? I don't know. We're working on it and we will draw the consequences for the deficit," he said.
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