French budget deficit narrows slightly in May

PARIS - France's budget deficit narrowed slightly in the first five months of 2008, compared with the same period a year ago, a development that could offer slight relief as the government tries to keep to EU fiscal rules.

By (Reuters)

Published: Fri 4 Jul 2008, 2:48 PM

Last updated: Sun 5 Apr 2015, 12:46 PM

The deficit slipped to 50.06 billion euros ($79.50 billion) at the end of May from 50.55 billion euros in the same period a year before, data from the Budget Ministry showed on Friday.

‘The moderate progression of spending in the first few months of the year is in line with the ceiling voted in the 2008 finance law which anticipates state spending matching the pace of inflation,’ the ministry said in a statement.

Spending reached 117.2 billion euros in May, up from 116.3 billion a year ago while receipts rose to 86.1 billion from 85.4 billion.

Tax returns rose 2.9 percent in the first five months of the year, while non-tax returns jumped 35.1 percent thanks largely to a dividend from the Bank of France, which was double the 2007 payout, and earlier dividend payments from other companies.

Despite the slight improvement, the government will struggle to rein in a deficit which has drawn criticism from Brussels. The European Commission fears the public deficit could near the European Union ceiling of three percent of gross domestic product this year and hit that level in 2009 unless policies change.

An expected slowdown in economic growth in France, which took over the rotating presidency of the EU this month, could put further pressure on its public finances, analysts say.

The euro zone's second biggest economy ran a budget deficit equivalent to 2.7 percent of GDP last year, above the 2.4 percent goal fixed by President Nicolas Sarkozy's government and up from 2.4 percent in 2006.

The government aims to reduce this to 2.5 percent this year and to balance its books in 2012 although the top public finance audit body said last month there was a risk this target could be missed.

The Organisation for Economic Cooperation and Development said in early June that France's budget deficit would hit the three percent limit in 2008 as declining economic growth weighs on government accounts.

Sarkozy has promised to rationalise the French state partly by slashing the number of public sector workers. But some analysts are sceptical about the government's ability to cut costs sufficiently and have called for austerity measures.

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