France unlikely to achieve 2017 deficit target: fiscal watchdog

September 27, 2016 7:22 AM EDT

French President Francois Hollande delivers a speech during a ceremony to mark the laying of the first stone of the extension of the port of Calais, France, September 26, 2016. REUTERS/Thibault Vandermersch/Pool


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PARIS (Reuters) - France is unlikely to meet its 2017 budget deficit target, the country's independent fiscal watchdog said on Tuesday, casting doubt on the government's plan to cut the shortfall to less than 3 percent of output.

The High Council of Public Finance's (HCFP) assessment is a fresh blow to President Francois Hollande's economic record seven months from a presidential election that polls suggest he has little chance of winning if he runs.

On Monday, jobless figures for August showed the biggest jump in the number of unemployed people for nearly three years.

Scrutinizing the main economic forecasts underpinning the 2017 budget, the HCFP said the government's deficit reduction plans were "improbable" because of high risks that spending would be more than planned and revenues less than hoped.

"Based on the information at its disposal, (the HCFP) considers as uncertain that the nominal deficit will be brought to less than 3 percent of GDP in 2017," it said in a report issued as Hollande's government prepares to publish its 2017 budget on Wednesday.

Finance Minister Michel Sapin dismissed the watchdog's concerns, saying that it was skeptical every year and yet the deficit targets had been met.

"I therefore reaffirm the seriousness of the budget and the government's determination to bring the deficit to less than 3 percent in 2017," Sapin said in a statement.

Paris hopes to rebuild its fiscal credibility with its European partners by targeting a deficit of 2.7 percent of GDP for 2017, the lowest in a decade and under the EU's limit of 3 percent.

A serial offender of the EU's fiscal rules, France has delayed bringing its deficit below 3 percent several times under both Socialist and center-right governments in recent years.

EU Economic Affairs Commissioner Pierre Moscovici, who in effect polices government finances to ensure they are living up to their promises, said he expected France to get the deficit below the 3 percent threshold next year.

"I think it's possible," Moscovici, a former finance minister in Hollande's first government, said in an interview with L'Opinion newspaper.

France's fiscal watchdog said government forecasts for 1.5 percent GDP growth this year and next were optimistic, noting they were higher than what most private sector economists expected.

"The government's growth outlook, which is based on a number of favorable assumptions, does not display the caution necessary to best meet public finance targets and commitments," it said.

(Reporting by Myriam Rivet and Leigh Thomas; Editing by Andrew Callus and Robin Pomeroy)



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