2011 growth forecast for France is cut following meeting between government officials
France’s economic forecast for 2011 has worsened after the president, Nicolas Sarkozy, met senior finance ministers. The economy is now predicted to expand by 2 percent, down from the 2.5 percent prediction from the previous forecast. The country is expected to meet its 1.4 percent growth target for this year, or possibly exceed it, the French government has announced.
Ministers even had their summer holidays interrupted to discuss the challenges that France is currently facing with its deficit, at a meeting at Fort de Bregancon, Sarkozy’s official retreat. He stated that the most important objective for France in the near future was to reduce it’s deficit from 8 percent to 6 percent in 2011, regardless of the level of economic growth. Furthermore, the government will have to find a way of funding 100 billion Euros in order to meet the EU target of 3 percent in three years time.
If France is to deal with their Debt Problems serious steps need to be taken. Public expenditure would need to be reduced and the president reiterated his dedication to freeze VAT and avoid issuing income tax rises on workers and taxes on companies. However, he did say that 10 billion Euros in tax breaks would be eliminated later this year, in order to help the country meets its deficit targets next year. France’s 2010 economic growth target of 1.4 percent was in line with estimates issued by the IMF (International Monetary Fund). In fact, the IMF now expected economic growth to be as high as 1.6 percent this year, ahead of the government’s forecast.
Some economists are optimistic, predicting that 2011 could be a year of more consistent economic growth, after sluggish growth in recent quarters. However, others remain more cautious. Gilles Moec from The Deutsche Bank suggested that these forecasts were not compatible with the current economic environment and expected France’s economic growth to be closer to 1 percent next year. Meanwhile, many other European countries are trying to figure out ways of reducing their budget deficits. In the second quarter of 2010, Germany experienced the strongest economic growth, at 2.2 percent, followed by Britain, which experienced 1.1 percent growth.
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