October 9, 2012
France, Spain and several other euro-zone governments won’t hit budget deficit targets agreed to with European authorities, the International Monetary Fund said Tuesday, setting the stage for a contentious debate over whether the governments should pursue more cuts or allow the targets to slip.
Governments across the European Union have been slashing spending and raising taxes to bring their deficits back in line with the bloc’s budget rules, which call for deficits to remain under 3% of gross domestic product. But anemic growth and recession, partly because of previous rounds of austerity, have made the deficit targets difficult to hit and sparked growing political discontent in many of the EU’s 27 member states.
The IMF said in its semiannual economic outlook that it expects France’s deficit to be 4.7% of GDP this year and 3.5% of GDP at the end of 2013. France has pledged to cut its deficit to 3% of GDP in 2013. The Socialist government of President François Hollande last month unveiled a package of austerity measures, including a 75% tax on incomes over €1 million ($1.30 million), to hit the target.