French public debt over 2.0 trillion euros for first time

PARIS - Agence France-Presse

This file picture taken with a tilt and shift lens on April 14, 2012 shows the Bercy Finance and Budget ministry, in Paris. AFP Photo

France's public debt has topped the symbolic level of 2.0 trillion euros for the first time, according to official data Tuesday, putting Paris on a fresh collision course with the European Union.
      
The total national debt amounted to 2.023 trillion euros ($2.57 trillion) in the second quarter of the year, which represents 95.1 percent of gross domestic product (GDP), said national statistics agency INSEE.        

European Union rules say that debt must not exceed 60 percent of GDP, or be falling significantly towards this ratio.
     
In the first quarter of the year, the debt stood at 1.995 trillion euros, or 94.0 percent of GDP, INSEE said.
      
France is already at loggerheads with the EU over its budget deficit, which is supposed to be kept under three percent of GDP.
     
Paris promised to bring the deficit under three percent by next year but, in a stunning about turn, announced earlier this month that it was pushing back this target until 2017.
      
The deficit this year is forecast to be 4.4 percent of GDP, dropping only fractionally to 4.3 percent next year.
      
France is struggling with an economy at a standstill and sky-high unemployment.
      
There has been zero growth for the first two quarters of the year and Finance Minister Michel Sapin is banking on sluggish output of 0.4 percent for the whole of the year.
      
France will on Wednesday publish its annual budget expected to confirm the gloomy outlook and reaffirm it will miss its deficit targets.
      
The economy ministry stressed that the government's plan to clean up the public finances and make sweeping cuts in public spending "should allow us to stop the growth in debt."       

"France also enjoys the confidence of investors which allows the state but also companies and individuals to borrow at very low rates," the ministry said.
      
To combat the economic crisis, the deeply unpopular government of President Francois Hollande has put in place a "Responsibility Pact" which offers companies tax breaks of 40 billion euros in return for creating 500,000 jobs over three years.
      
However, given the parlous state of the public finances, the tax breaks are compensated by 50 billion euros in public spending cuts.