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UPDATE 1-France: 2012 deficit target on track, Dexia could weigh
November 14, 2012 / 1:27 PM / 5 years ago

UPDATE 1-France: 2012 deficit target on track, Dexia could weigh

(Adds details, background)

PARIS, Nov 14 (Reuters) - France is on track to reach its public deficit target of 4.5 percent of national output this year, although aid for Franco-Belgian bank Dexia could add to the tally, the Finance Ministry said on Wednesday.

The European Union’s Eurostat statistics agency is to rule next month whether 2.6 billion euros ($3.30 billion) in state aid for Dexia should be included in France’s deficit calculation, which would increase it to 4.6 percent of GDP.

“At this point, (Dexia) is not included in our public deficit target because we do not know how European accountants will treat the operation,” a Finance Ministry official said, presenting a bill updating the 2012 budget.

“It may be considered as a classic financial operation, as they have done in the past, and it wouldn’t then have any impact on the deficit. But it’s not impossible that they reconsider this view and classify it as spending to be included in the deficit.”

The Dexia aid will be included in the public debt, increasing it to 90.0 percent of gross domestic product from a previous estimate of 89.9 percent.

President Francois Hollande’s Socialist government announced more than 7 billion euros in new taxes in July in order to keep its deficit target within reach this year.

The real challenge will come next year when Hollande aims to carry out France’s toughest belt-tightening effort in 30 years in order to cut the deficit to 3.0 percent of GDP.

The government is counting on 20 billion euros in tax increases targeting the wealthy and big companies as well as a spending freeze to meet its target.

The 2012 budget revision bill includes legislation to clamp down on tax fraud, which the Finance Ministry said was expected to generate an additional 1 billion euros next year.

Under the measures, individual taxpayers who refuse to reveal the source of undeclared funds invested abroad will be taxed at a rate of 60 percent.

The government also aims to clamp down on value added tax fraud in the sale of cigarettes and used cars while the powers of the tax police will be boosted. (Reporting by Jean-Baptiste Vey; writing by Leigh Thomas; Editing by Janet Lawrence)

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