France reveals doubled deficit, warns of tough budget

French state overspending more than doubled in the first nine months of the year because of the economic crisis, officials said yesterday, highlighting a budget dilemma common to many European countries.

French tax revenues slumped with a downturn in economic activity, but spending rose sharply to shore up activity and contain the crisis, the finance ministry said.

The figures emerged the day after Prime Minister François Fillon warned of tough measures to come in a few months to bring overall public overspending within EU limits by 2014.

He also said in remarks to the Le Monde newspaper that he would balance the books by 2016, to keep up with Germany which has put a legal fence around deficit financing.

The French central government deficit, one part of the overall deficit, stood at €125.8 billion on September 30 from €56.6 billion at the end of September last year.

The finance ministry said that the increase was a result of a drop in tax revenues arising from the economic crisis, together with extra expenditure of €29.9 billion to combat the downturn.

The ministry said that the figures were in line with its forecast for the whole year of a government deficit of €141 billion.

The government expects the overall public deficit covering the state, welfare and local authority budgets, to reach the unprecedented level of 8.2 per cent of output this year.

EU and eurozone rules for this key measure of public finances require that the figure must not exceed three per cent of output and should move towards surplus in times of growth.

However, several eurozone countries, some of which, including France,s already had high deficits before the financial crisis, are now running deficits in excess of this limit.