PARIS (AFP) - France signalled it will slash its public overspending next year to come into line with EU rules in a 2005 budget published on Wednesday and forecast economic growth of 2.5 percent.
The budget targets cutting the public deficit back to 2.9 percent of output next year. This year it is expected to be 3.6 percent, far above the eurozone limit of 3.0 percent of gross domestic product.
French Finance Minister Nicolas Sarkozy told a press conference that "the reduction of the deficits is the absolute priority" for the government and that "it is the first time in our history that the deficit will have been reduced by so much in one year".
He declared that the budget was intended "to re-create the margins for manoeuvre so that our country can head towards lasting and sustainable growth.
"We do not have a margin for manoeuvre because of our debt of 1,000 billion euros (1,220 billion dollars).
"I am convinced that the accumulation of the deficit and the debt has a destabilising effect on the morale of the French people. The problem for France is that the state is very indebted and households not enough."
Sarkozy said that overall the budget had been drafted to make available 17 billion euros of which 10 billion euros was being used to reduce debt, five billion for the government's other priorities and two billion in tax measures to stimulate growth and employment.
The government of Prime Minister Jean-Pierre Raffarin had pledged to rein in the public deficit to below the ceiling next year and has achieved this in the budget plan partly with a one-off transfer from the electricity utility EDF and because growth and tax receipts are recovering.
The deficit will fall from 55.08 billion euros (67.59 billion dollars) in the 2004 budget to 44.93 billion euros planned in 2005.
France failed to meet the target in 2003, when the public deficit came to 4.1 percent of output, and in 2002, when it amounted to 3.2 percent.
As a result France is under strong prssure from the European Commission to put its finances in order, even though EU finance ministers have decided not to apply the full rigour of penalty procedures against France, and another country in breach, Germany.
The European Union's Stability and Growth Pact, which underpins the euro, sets a public deficit ceiling of three percent of GDP. The public account is comprised of the national, regional and social welfare accounts.
The improvement seen for the 2005 deficit was partly due to a one-time payment of seven billion euros (8.6 billion dollars), or 0.4 percent of GDP, by Electricite de France for the government taking control over the state-owned electricity producer's retirement funds, the government noted.
The 2005 budget is based on economic growth of 2.5 percent, equivalent to the expansion expected this year, and an inflation rate of 1.8 percent, government spokesman Jean-Francois Cope said.
France is expecting public debt to rise to 65 percent of GDP in 2005 from 64.8 percent this year, further breaching the EU debt rule of 60 percent of GDP.