France says government deficit doubles in crisis

France said its central government deficit had doubled in the last 12 months, highlighting a jump in debt problems facing many governments because of the global economic crisis.

Spending has increased sharply, and tax revenues have slumped by 23.5 per cent.

The French budget ministry said the central deficit had more than doubled over 12 months.

On July 31, the deficit stood at €109 billion from €51.4 billion at the same time last year, about a month before the collapse of Lehman Brothers investment bank turned the global crisis into a threat of systemic failure. The ministry said: "The difference from one year to the next can be explained mainly by the weight of the economic situation on the trend for revenues, and by the effect of different measures to support the economy, amounting to €25.8 billion."

The latest official French estimates signal that the central deficit will surge to a record of €140 billion at the end of this year. The government, which is completing its budget for next year, has said that it will not increase taxes.

On July 31, central budget revenues amounted to €133.8 billion, a fall of 23.5 per cent from the total of €175 billion at the same time last year.

However, the cost of paying interest on the debt fell by 5.8 per cent because interest rates are now low as part of measures to support economies.

A drop in tax income as economies shrank, and huge spending programmes to rescue banks and auto companies and keep credit flowing through economies, have raised deficits substantially in many countries.

The data underscores a range of related problems facing governments in Europe, and particularly Britain and Ireland, and a dilemma over when and how to wind down stimulus programmes as recovery picks up, a subject set for discussion at the G20 talks in London.

Budget deficits were a problem for some countries even before the crisis and now raise pressures on governments to find ways of bridging the gap, by issuing big amounts of bonds, raising taxes and / or cutting spending.

The data from France concerned only the central government budget, not the general public deficit as measured in the EU and eurozone to contain public deficits under the Stability and Growth Pact.

The pact covers budgets by central government, welfare and local authorities. In France overall social budgets are separate from the central government budget.