Dire deficit warning for France

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Dire deficit warning for France

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A strong warning has been issued by France’s national audit office on the state of the economy.

It said the new Socialist government of Francois Hollande will have to lay off public sector workers and bring in major austerity measures next year if it is to cut the deficit to promised levels.

The auditors calculate government spending will have to be slashed by 33 billion euros next year – 3.3 percent of the total budget.

“2013 is a crucial year. The budgetary equation is going to be very hard, much harder than expected due to the worsening of the economic picture,” Didier Migaud, head of the Court of Auditors, told a news conference. “

“It will require unprecedented cuts to public spending as well as increases in taxation. “If the government wants to have some room for manoeuvre on its salary policy it has to reduce the overall number of staff.”

The quasi-judicial body responsible for overseeing public accounts said France needs to find six to 10 billion euros in extra budget savings this year and 33 billion next year or risk unnerving financial markets so that France’s borrowing costs go up.

Economists have warned for months that faltering economic growth was gnawing a hole in state revenue, but President Francois Hollande largely ignored the issue until he won presidential and parliamentary elections in May and June.

Having gained votes by promising not to impose Greek-style austerity, Hollande risks angering the public, leftist allies and trade unions if he does what the audit office suggests.