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France to cover extra lockdown costs with T-bills -sources

PARIS, Nov 3 (Reuters) - The French government will absorb extra strain on this year’s budget from a second lockdown through the issuance of Treasury bills, Finance Ministry sources said on Tuesday.

The government put France under lockdown last Friday until at least the start of December as it struggles to contain a resurgence in new COVID-19 cases.

It said at the time it would earmark an extra 20 billion euros - including nearly 11 billion in direct handouts to struggling small businesses - to cover the costs related to the lockdown in a 2020 budget update to be presented on Wednesday.

Better-than-expected tax revenue vis-a-vis previous estimates offered some relief from the higher costs and short-term debt issuance would finance the rest, finance ministry sources said.

“Medium and long-term bond issuance net of buybacks should remain at 260 billion euros. Any necessary adjustments will be made on other financing sources, short-term (sources) in particular,” one of the sources said.

The Finance Ministry has said it now expects the public sector budget deficit to reach a record 11.3% of gross domestic product this year due to the costs of pulling the economy back from the brink of collapse during the coronavirus crisis.

Nonetheless, the government expects the euro zone’s second-biggest economy to contract 11% this year, revised last week from a previous estimate of 10%. (Reporting by Leigh Thomas; Editing by Andrea Ricci)

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