France, Spain miss budget targets

France’s 2012 budget deficit was 4.8 per cent of economic output, statistics office Eurostat said in the final reading of all 27 countries’ public accounts. It compared with a target of 4.5 per cent.

Spain’s budget shortfall was 7.1 per cent, excluding bank recapitalisation, higher than the government’s 6.98 per cent official year-end reading and well above Madrid’s original target of 6.3 per cent.

Overall, the 17-nation eurozone looked much better off at the end of 2012, however. Its combined fiscal deficit was 3.7 per cent of gross domestic product, compared with 4.2 per cent in 2011 and 6.5 per cent in 2010.

Budget cuts are at the centre of the eurozone’s strategy to overcome a three-year public debt crisis but they are also blamed for a damaging cycle where governments cut back, companies lay off staff, Europeans buy less and young people have little hope of finding a job.

Crippling levels of unemployment and outbreaks of violence in southern Europe are now forcing something of a rethink, with the focus shifting to economic growth strategies. Both Spain and France are expected to get more time to reach EU-mandated targets of 3 per cent.

“We need to combine the indispensable correction in public finances, huge deficits, huge public debt... with proper measures for growth,” the European Commission’s President Jose Manuel Barroso said.