PARIS, Mar 31 (AFP): France is way behind targets for cleaning up its budget, official data showed on Monday, deepening a dilemma for President Francois Hollande over cutting spending without splitting his left-wing backers.
The public deficit, or gap between spending and revenues, amounted to 4.3 per cent of national output last year, the data revealed, raising the stakes as Hollande considers changing key ministers after an election debacle.
The deficit figure from the national statistics office marked a sharp reduction from 4.9 per cent in 2012 but was clearly above the government's target of 4.1 per cent.
This means that the government faces a huge task, in economic and political terms, in meeting its commitment to the European Union to reduce the deficit to less than 3.0 per cent of gross domestic product in 2015.
Hollande, handicapped by weak economic growth and the failure of a promise to stop unemployment rising, suffered a huge setback on Sunday when his Socialist party did exceptionally badly in local elections, and the far-right National Front did well. France has won extra time from the European Commission to correct its badly over-stretched public finances on condition it enacts big reforms.
France is the eurozone's second-biggest economy, and its finances are closely watched by the EU, the European Central Bank, Germany-the zone's biggest economy-and financial markets where France borrows.
The government is making little progress in enacting radical reforms to cut spending and raise business competitiveness, as have several other EU countries.
France has a big trade deficit compared to a huge surplus by Germany, and there is now broad agreement that taxes, and notably charges on businesses, are too high.
Other official data on Monday showed that business profitability, already among the lowest in Europe, fell last year and crimped investment.
The central bank said this month that industrial activity was picking up and forecast growth of 0.2 per cent in the first quarter, after growth of 0.3 per cent for the whole of 2013.
But in February the number of unemployed people rose by 0.9 per cent to a record 3.34 million.
The administration which Hollande oversees is in coalition with the Green party. Some of the most left-wing elements among his backers want the government to back-peddle on a recent change of policy direction involving a "Responsibility Pact" to reduce social charges on businesses, paid for by spending cuts of 50 billion euros ($69 billion) over three years.
