* Conservative lawmaker expects 4 pct 2017 deficit - memo
* Main candidates say spending cuts to come with tax cuts
* Breaking deficit pledge would clash with Brussels, Berlin
By Yann Le Guernigou and Michel Rose
PARIS, Sept 15 The main conservative candidates
for the French presidency are all on course to break the
country's pledge to bring its budget deficit below the euro
zone's 3 percent limit in 2017, setting up a clash with partners
resentful of its serial offender record.
The ruling Socialist government promised to bring down the
deficit to 2.7 percent in 2017, after winning a two-year
reprieve last year, escaping sanctions in exchange for
Leading centre-right candidates vying for the conservative
ticket in November's primaries ahead of next year's presidential
elections have all pledged to put France's house in order and
eventually return to a budget surplus.
But they say they expect to find a trail of unbudgeted tax
cuts and spending measures left by the Socialists once they get
in power that will be impossible to reverse immediately.
They also argue the spending cuts they plan to make will
have to go hand-in-hand with lower taxes to kick start a
sluggish economy weighed down by one of the highest tax burdens
in the euro zone.
In a confidential memo sent to centre-right lawmakers and
obtained by Reuters, the head of the lower house of parliament's
finance committee, conservative Gilles Carrez, said he expected
a deficit of around 4 percent of gross domestic product in 2017.
"The idea of a temporary increase in our deficits at the
beginning of the new mandate makes economic sense," Carrez, an
expert on budget issues and a respected voice in parliament,
He said the apparent disconnect between the right's message
of fiscal rectitude to voters and higher budget deficits in 2017
or even 2018 will have to be explained by the fact that lower
taxes will have an immediate impact while spending cuts will
only be felt in the medium to long term.
However, he warned France may still find itself in the
crosshairs of bond vigilantes, which could push interest rates
CONVINCE THE PAYMASTER
Earlier in the summer the European Commission spared Spain
and Portugal from fines over their excessive budget deficits.
Some saw this as a tentative effort to promote more expansionary
economic policy in response to Britain's destabilising vote to
leave the EU.
However, former French Prime Minister Francois Fillon, told
Les Echos newspaper on Wednesday that foreign investors,
Brussels and Berlin, the bloc's paymaster, would still be more
easily convinced if structural reforms are quickly passed.
"The Germans do not give us the benefit of the doubt anymore
and we'll need to show them evidence," he said.
"At the end of October (2017), they will be able to see that
we will have reformed labour laws, sharply cut taxes, raised the
pension age to 65 and reformed unemployment benefits. Timing is
The official economic manifesto of The Republicans, the main
centre-right party, sees France's deficit at 3.5 percent in both
2017 and 2018, before a return to a surplus in 2022.
Hervé Gaymard, the manifesto coordinator of the leading
conservative in the polls, Alain Juppé, expects for his part to
see the French deficit stand at between 3.4 percent and 3.7
percent next year, he is quoted as saying in Les Echos.
Former labour minister Eric Woerth, a close supporter of
former leader Nicolas Sarkozy, sees France's deficit around 4
percent in 2017, according to Les Echos. They did not
immediately return a request for comment.
The move is likely to bring back memories of 2007 at the
European Commission, when a newly elected Sarkozy personally
travelled to Brussels to fend off pressure from EU finance
ministers to balance the budget by 2010.
He argued at the time that France was making painful
structural reforms to its labour market and pensions that would
cut public debt in the long term, but promised he would balance
the books by 2012 instead.
But those pledges were swept away by the global financial
crisis, which forced governments across the world to engage in
stimulus. France's deficit rose to more than 7 percent in 2009
and was last year down to 3.5 percent, the bloc's
Despite the leniency shown to Spain and Portugal, it remains
to be seen whether the current EU economic affairs commissioner,
French Socialist Pierre Moscovici, will show the same
magnanimity with political rivals.
"There can be no new delay," he said earlier this month.
(Additional reporting by Sophie Louet; editing by Leigh Thomas
and Toby Chopra)