France and Spain miss deficit goals

France and Spain fell short of their budget deficit goals last year, data showed yesterday, although the overall fiscal picture for the eurozone improved.

France’s 2012 budget deficit was 4.8 per cent of economic output, statistics office Eurostat said in the final reading of all 27 countries’ public accounts. It compared with a target of 4.5 per cent.

Spain’s budget shortfall was 7.1 per cent, excluding bank recapitalisation, higher than the Government’s 6.98 per cent official year-end reading and well above Madrid’s original target of 6.3 per cent.

Overall, the 17-nation eurozone looked much better off at the end 2012, however. Its combined fiscal deficit was 3.7 per cent of gross domestic product, compared with 4.2 per cent in 2011 and 6.5 per cent in 2010.

Budget cuts are at the centre of the eurozone’s strategy to overcome a three-year public debt crisis but they are also blamed for a damaging cycle where governments cut back, companies lay off staff, Europeans buy less and young people have no to little hope of finding a job.

Crippling levels of unemployment and outbreaks of violence in southern Europe are now forcing something of a rethink, with the focus shifting to economic growth strategies.

Both Spain and France are expected to get more time to reach EU-mandated targets of three per cent.

EU leaders are desperate for economic growth as the eurozone struggles through its second consecutive year of recession, and some officials say they will back off from the spending cuts blamed for deepening Europe’s economic downturn.

The Commission will decide on May 29 whether to recommend to EU Finance Ministers to give Paris and Madrid until 2015 to cut their fiscal gap to three per cent of GDP, today targeted for 2014.