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France still sticking to deficit target despite lower growth

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(Globalpost/GlobalPost)

French Finance Minister Pierre Moscovici said Monday he was sticking to the aim of cutting public deficit to three percent of output this year but said the country's credibility would not be hit if it failed to do so.

Moscovici's comments came after revised figures by the national statistics agency showed that the economy shrank by 0.3 percent in the fourth quarter of 2012 and growth was zero for the whole year.

The latest data puts the government in a dilemma over a commitment to the European Union to cut its public deficit to within the ceiling of 3.0-percent of output this year as the eurozone, struggling as a whole with recession, fights its way out of the debt crisis.

"Our true commitment was to reduce our structural deficit by a huge margin," Moscovici told reporters from the Anglo American Press Association.

The day I am speaking here I stick to the three percent," he said.

I am waiting for the growth forecast ... on Friday and then we will enter into a dialogue and we have got the tools for that," Moscovici said.

"We must not add austerity to the risk of recession."

The zero growth in France in 2012, as reported by the national statistics agency INSEE on Thursday, is a sharp slowdown from growth of 1.7 percent in 2011.

It scuttled France's chances of meeting its target of reducing the public deficit to 4.5 percent of gross domestic product in 2012, which was based on the economy growing by 0.3 percent.

It also threw into question the 2013 target of reaching 3.0 percent level that is the allowed ceiling for European countries.

Moscovici has said the government would now have to rethink its forecast for growth this year of 0.8 percent.

But he said France's credibility would not be dented it it failed to meet the three percent public deficit target this year.

He noted that European Economic Affairs Commissioner Olli Rehn had said that EU countries struggling to bring their public deficits back to within EU limits may win more time to meet the target if economic growth slows.

"The credibility question relies on the structural deficit before anything else," Moscovici said. " We will see what happens ... But I don't believe our credibility will be damaged if something exceptional intervenes."

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http://www.globalpost.com/dispatch/news/afp/130218/france-still-sticking-deficit-target-despite-lower-growth