Record French debt burden adds to strain on public finances
PARIS (Reuters) - France's national debt hit a record high in the second quarter, data showed on Tuesday, underlining the country's struggle to rein in public finances a day before the 2015 budget is presented.
Topping two trillion euros (1.56 trillion pounds) for the first time, the national debt rose to 95.1 percent of annualised economic output in the second quarter from 94.0 percent in the first quarter, the official statistics agency INSEE said.
The news follows the latest moves by France to get its finances in order, with the government late on Monday announcing plans to cut health spending and pare family benefits.
The Socialist government will cut social security spending by 9.5 billion euros ($12.05 billion) next year, officials said, in an attempt to cut a welfare system deficit that is set to come in at a bigger-than-expected 11.7 billion euros in 2014.
That means the welfare and health systems make up more than half the 21 billion euros in overall budget savings the government aims to make in its 2015 budget.
Les Echos business daily reported in its Wednesday edition that public spending would decline by 0.4 percentage points next year to 56.1 of percent of gross domestic product, while the overall tax take would shrink by 0.1 percent.
The government is looking to wring 3.2 billion euros from health spending alone, a tough pill to swallow in country that prizes its generous public health service.
A further 700 million euros in savings will be squeezed out of the budget for family benefits, which economists say has encouraged higher birth rates than many other European nations.
Eager to avoid outright budget austerity, the government is loathe to make unpopular cutbacks and has so far largely focused its belt-tightening instead on limiting public spending growth to the rate of inflation.
But cutting has increasingly become unavoidable as it tries to get the public accounts in order and in the face of weaker-than-expected tax receipts and near-zero inflation.
The government is likely to revise up the nation's debt burden in the 2015 budget after it acknowledged earlier this month that its public deficit would be bigger than expected.
It had previously hoped to cap the public debt at 95.6 percent of GDP this year and keep it at that level next year, but the figure could keep rising to hit 100 percent as soon as 2015 following the deficit revision, according to Reuters calculations.
The government said earlier this month that it would not cut its public deficit as fast as it had promised its EU partners, blaming weak growth and low inflation.
It now does not expect the deficit to fall in line with an EU-agreed limit of 3 percent of economic output until 2017, instead of 2015 as previously planned.
($1 = 0.7883 euro)
(1 US dollar = 0.7918 euro)
(Reporting by Leigh Thomas; Additional reporting by Nick Vinocur; Editing by Andrew Callus and Crispian Balmer)
