French govt forecasts 1.75pc growth in budget - Oman Daily Observer

Paris — The French government yesterday unveiled its draft austerity budget for 2012, in which it aims to slash the budget deficit from 5.7 per cent of gross domestic product to 4.5 per cent, even as the country's public debt is set to break new records.
The budget bill presented by Finance Minister Francois Baroin and Budget Minister Valerie Pecresse proposes to slash the budget deficit from 95.5 billion euros ($130.2 billion) this year to 81.8 billion euros in 2012 by scrapping a host of tax breaks and introducing new taxes.
Many of the measures were announced in August, when the government announced an austerity plan aimed at saving France's AAA credit rating.
The plan includes a tax on soft drinks and a 3 per cent extra tax on the rich, which is to be scrapped when the budget deficit is brought within the European Union guideline of 3 per cent of GDP.
France aims to meet the 3 per cent target in 2013.
A further 30,400 public service positions are also to be cut next year, as part of a programme to not replace one out of two retiring civil servants. That plan has been in place since 2007.
On Tuesday, teachers held a one-day strike to protest the policy, which has seen around 65,000 jobs in education axed.
The government forecasts the economy to grow by 1.75 per cent this year and next. Some analysts say the forecasts are overly optimistic, after the economy failed to grow at all in the second quarter.
The International Monetary Fund has forecast France's GDP to grow 1.7 per cent this year and 1.4 per cent in 2012.
"Even if it's difficult, it (1.75 per cent) is not unattainable," Baroin said.
While the budget deficit is set to fall in 2012, public debt will rise next year, after France increased its guarantees to the European Financial Stability Facility in line with a July accord on tackling the euro zone debt crisis.
Public debt is projected to reach 87.4 per cent of GDP in 2012, up from 85.5 per cent this year, which was already a record and is one of the highest in Europe.
Servicing that debt is expected to cost 48.8 billion euros in 2012, making it the government's biggest expenditure. Education currently consumes the lion's share of the budget.
France's national statistics office said Wednesday that the economy stagnated in the second quarter with zero per cent growth.
World markets have been rocked by rumours that France might be stripped of its top triple-A credit rating and that its banks were overexposed to the debts of weaker euro zone countries, especially Greece.
Prime Minister Francois Fillon on August 24 unveiled a 12-billion-euro deficit cutting package that raised taxes on the rich and closed tax
loopholes in the hope of preserving the envied rating.
The defence budget will grow 1.6 per cent in 2012 to 30.63 billion euros, excluding pensions.
France is hoping to reduce the costs of overseas operations in countries such as Afghanistan, where it is to start withdrawing its troops. — dpa