France will probably need extra action to cut its public deficit in 2012 and 2013 as falling growth threatens to complicate economic recovery, the International Monetary Fund said on Wednesday. The IMF forecast that growth in France, the eurozone's second-biggest economy, would slow in 2012 to 1.9 percent from 2.1 percent this year. This was sharply lower than the French government's 2012 forecast of 2.25 percent growth.
"Progress is being made in fiscal consolidation but more efforts might be needed to reach the 2012-13 targets," it said in a report due for publication later Wednesday but released early by the French economy ministry. It said that without further efforts France was set for a public deficit of 3.8 percent of output in 2013, above the EU three-percent limit and France's forecast. French public debt would peak at 88 percent that year, it added. France is under growing pressure to cut its own deficit after its President Nicolas Sarkozy last week played a leading role in drawing up a new debt bailout for Greece to stabilise the eurozone.
He is trying to push through a change to France's constitution that would oblige its government to keep a rigorously balanced public budget, but faces a battle with the Socialist opposition over the plan. Officials are concerned that France's credit rating could suffer if Sarkozy were forced to call a special assembly to pass the budget law. Analysts warn that France is the weakest of the European countries to hold a top credit rating.
"France cannot risk missing its medium-term fiscal targets given the need to strengthen implementation of the (EU) Stability and Growth Pact and keep borrowing costs low by securing France's AAA-rating," the IMF report said. Sarkozy's constitutional reform "would help to unequivocally signal the authorities' commitment to the adjustment path."
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