PM says no new austerity despite growth forecast cut

Prime Minister Jean-Marc Ayrault said on Tuesday that the French government was not planning further spending cuts after admitting that the 2013 growth forecast would be cut, thus disrupting budget plans.

Speaking before Socialist deputies, Ayrault said the government "won't announce a package of spending cuts for 2013," according to one lawmaker.

French President Francois Hollande, speaking during a visit to Athens, said: said: "Today everybody knows that we will not reach 0.8 percent (of growth) as forecast."

Saying that a revised forecast would be issued at the end of March, he declared: "On the economic growth plan, France is among countries which are in the least poor position, even if we are far from meeting our objectives."

The prime minister said the government's main objective was to reach a balanced budget at the end of its five-year mandate in 2017, according to another lawmaker.

Ayrault spoke after ambiguous comments by Foreign Minister Laurent Fabius on an impending cut to the government's 2013 growth forecast.

When asked by a journalist on RTL radio if the figure would be 0.2-0.3 percent, Fabius replied that "it's around this figure", having previously recalled that the forecast had first been 1.2 percent, and then 0.8 percent.

The finance ministry said later that the forecast for 2013 had not yet been decided.

Fabius did not specify whether he meant that the previous forecast of 0.8-percent growth would be cut to 0.2-0.3 percent, or by 0.2-0.3 percentage points which would put the new forecast at 0.5-0.6 percent.

He said: "There was a growth forecast which was to begin with 1.2 percent. Then it was revised to 0.8 percent and now, as across Europe, things don't seem to be going at all well. We will be obliged to revise downwards."

He said: "This must be done in the next few days."

The statements left Ayrault stating there was no "cacophony" within his government.

The prime minister said the government would make any decisions about what actions to take after the European Commission announces updated growth forecasts for EU member states on Friday.

There has been recent feverish speculation in recent days that would mean the government would turn to cutting spending after its previous austerity package favoured tax increases.

France's Sunday Journal said the government was looking at taxing, cutting and means-testing family allowances.

France's Cour des Comptes, which audits government spending and provides policy advice, has also urged the government to focus on spending cuts.

Finance Minister Pierre Moscovici also said Monday the government would have to put greater emphasis on cutting spending.

Slower growth would mean that the French government would have to either raise taxes or cut spending to meet its target of reducing this year the public deficit to the EU-ceiling of 3.0 percent of economic output.

However the European Commission has indicated that it may give France some slack in achieving this target, and the IMF has recently warned EU countries that cutting deficits too fast was harming growth.