France eyes deficit well below EU limits by 2017

(PARIS) - France on Thursday predicted that it would bring its public deficit down to well below the European Union ceiling by 2017, just weeks after receiving a stinging rebuke from Brussels.

The government reduced its forecast for its budget deficit -- income from taxes minus public spending -- to 3.6 percent of gross domestic product (GDP) in 2016 and 2.7 percent of GDP in 2017.

It had previously forecast deficits of 3.8 percent and 2.8 percent for 2016 and 2017 respectively.

According to EU rules, member states must have a budget deficit below three percent of GDP and France has been chided by Brussels, which has criticised "limited progress" by Paris in reducing its fiscal red ink.

Finance Minister Michel Sapin had said earlier this month that the deficit figure would be "well below" three percent by 2017, without giving a precise number.

France stunned its European partners in September by pushing back a pledge to squeeze its public deficit below the three percent ceiling from 2015 to 2017, when the next presidential elections are due to be held.

Last month, the EU gave France -- along with fellow deficit laggards Italy and Belgium -- an extra three months to fix their budgets but warned they would still incur humiliating penalties if the nations failed to curb spending.

French Prime Minister Manuel Valls has defended the country's budget as the best balance between fiscal rigour and economic stimulus, as Europe's second largest economy battles sluggish growth and high unemployment.

Francois Hollande's government is caught between a rock and a hard place in terms of relaunching the stagnant economy and reducing stubbornly high unemployment.

It has offered 40 billion euros ($49.7 billion) of tax breaks to business in a bid to create jobs but, mindful of Brussels and its budget deficit, has combined that with 50 billion euros in spending cuts.

The French economy grew by a meagre 0.3 percent in the third quarter, according to official figures published last month, following two previous quarters of zero growth.

On Wednesday, the government unveiled a controversial package of reforms aimed at reigniting the economy, including expanding Sunday trading and opening up traditionally closed-shop sectors such as the notarial profession.

The reforms prompted some 30,000 lawyers, bailiffs and notaries to hit the streets on Wednesday, protesting against what they said was an attack of their profession.