France today cut its growth forecasts for both this year and next and said it would miss its public deficit target this year.
It urged its European peers and their central bank to take steps to boost faltering growth and head off deflation.
Although he did not specifically comment on the key 2015 target – when France’s public deficit is due to come into line with the EU’s 3% of GDP cap – Finance Minister Michel Sapin said France would cut its deficit “at an appropriate pace.”
He said the euro zone’s second-largest economy would grow by only about 0.5% in 2014, half the previous forecast, meaning the public deficit would top 4% of GDP, missing a 3.8% target.
“The truth is that, as a direct consequence of sluggish growth and insufficient inflation, France will not meet its public deficit target this year despite a complete control of spending,” Sapin said.
While the Socialist government had based its 2015 fiscal targets on a 1.7% growth forecast, Sapin said it seemed unlikely, at this stage, that it would grow by much more than 1%.
Sapin said EU policies must be adapted to take into account the economic environment.
Europe needs a monetary policy “adapted to the exceptional situation of weak growth and weak inflation across the euro zone,” he said. He urged the European Central Bank to do more to combat deflationary risks and make the euro more competitive.
Earlier this morning, France’s INSEE statistics office said the economy posted no growth in the three months to June, the second quarter in a row that the economy was flat.
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