PARIS--France will likely miss its deficit reduction targets due
to weaker-than-hoped economic growth and risks the government will
fail to implement spending cuts fully, Moody's Investors Service
said Monday.
The ratings firm said in a statement that there are "significant
implementation risks' to France's plan to reduce spending by 50
billion euro ($67.1 billion) over three years because many of the
measures still haven't been defined.
Moody's also noted there is a challenging political
environment--around 40 of President François Hollande's own
Socialist majority abstained from voting on the spending cut plan
in the Spring--and said growth is weaker than expected.
"While the deficit will remain on a declining trend, the country
is likely to miss its fiscal targets in 2014 and 2015," Moody's
said in a statement. France aims to bring the deficit down to 3.8%
of economic output this year and 3% next year from 4.3% in
2013.
The caution from Moody's underscores concerns that the euro
zone's second largest economy will fail to pick up strongly enough
this year to cut off a rise in unemployment and help the government
rein in the deficit as planned.
Even Mr. Hollande's government warned in recent days that the
economy is doing worse than expected, and ministers will face a
challenging period when they return to work later in August.
In remarks published earlier Monday in French daily Le Monde,
the French president called on Germany to do more to invest and
drive European growth and said the European Central Bank must take
measures to inject liquidity into the economy as there is a "real
deflation risk."
France publishes its second-quarter economic growth figures Aug.
13, at which point the government will have a clearer picture of
whether it can meet its targets this year.
Moody's said current government forecasts are already too
optimistic. The firm cut its growth forecasts to 0.6% this year and
1.3% next year, from 1% and 1.5% previously.
The comments in Monday's statement didn't constitute a rating
action from Moody's, which affirmed its Aa1 rating for France in
January. But Moody's noted it has a negative outlook on France's
Aa1 rating as the country's fiscal performance is weaker than
countries with the same rating and "significantly weaker" than
top-rated triple-A countries.
Write to William Horobin at William.Horobin@wsj.com
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