Merkel wishes France success on cutting deficit

German Chancellor Angela Merkel Wednesday wished France success with a new plan to get its public deficit back under the EU limit of 3.0 percent of output by 2014.

"We wish France success because France is key to the eurozone as a whole and we will stand by it on the reforms it has planned or undertaken," she told reporters in Berlin.

France said earlier Wednesday that it aimed to get its public deficit back under the EU limit by 2014, a year later than expected, having decided to let debt grow further as it tries to jumpstart a sputtering economy.

The plan to bring the deficit below 3.0 percent of gross domestic product (GDP) is based on a broad effort that includes higher taxes along with savings within the social security system.

The programme was released by the finance ministry and based on what the government termed a "realistic" economic growth forecast of 0.1 percent this year and 1.2 percent in 2014, which it maintained would allow the public deficit to be cut to 2.9 percent of output next year.

The growth forecasts have been questioned however both by the International Monetary Fund and a new French high council for public finances, with the IMF forecasting Tuesday that the French economy would contract by 0.1 percent this year before expanding by a slight 0.3 percent in 2014.

France was initially to have cut the deficit to 3.0 percent of gross domestic product already this year, but has asked for more time owing to weak growth which has pushed the revised estimated 2013 figure up to 3.7 percent of GDP.

Under EU rules, eurozone members are expected to run public deficits of no more than 3.0 percent of GDP, and to work towards a balance, or even a surplus in times of economic growth.

Merkel has campaigned against deficit spending as a way of stimulating growth, arguing it laid the foundation for the EU's crippling debt crisis.

She told reporters after talks with Estonian Prime Minister Andrus Ansip that only budgetary discipline allowed for sustainable economic expansion.

"We talk about austerity -- that is the new word that gets used a lot -- but forget to talk about paying back these debts," she said.

"We talk instead about how much more money we can spend every year than we take in.

"Word has got around that we can do that without thinking and in the long run of course that's not going to go well, at least I can say that for Germany," she said, noting the country's ageing population and the debt burden for future generations.