Brussels, 16/09/2015 (Agence Europe) - France will meet its budget commitments for the first time in years, explained French finance minister Michel Sapin on Wednesday 16 September.
In nominal terms, France's public deficit will respect the following trajectory: 3.8% of GDP in 2015, 3.3% in 2016 and below 3% in 2017. In March, Paris was granted, on certain conditions, a further two-year breathing space to get its public finances in order (see EUROPE 11296).
The French draft budget, which will be published at the end of the month before being submitted to the European Commission in mid-October, takes a cautious approach. It is based on assumptions of economic growth of 1.5% of GDP in 2016 and 1% in 2015, and average inflation of 1.0%. A lower than forecast inflation rate has a negative impact on public finances by reducing income and the impact of budget savings.
As a result of €50 billion in extra savings in the 2015-2017 period, public spending is expected to be reduced to 55.1% this year, and 55.8% next year.
On Wednesday, the OECD endorsed the French plans by forecasting growth in the country of 1.4% of GDP in n 2015 and 1.4% in 2016. Boosting its growth forecasts for the eurozone for 2016 to 1.6% of GDP, (a 0.1% rise), the OECD feels that there will be stronger growth in Germany (1.6% in 2015 and 2% in 2016) and slightly weaker growth in Italy (+0.7%; 1.3 %). Despite the falling value of the euro and oil prices, the OECD says the recovery in the eurozone is disappointing due to persistent problems in the financial sector and the ECB's quantitative easing not having a strong enough impact. (Mathieu Bion)