PARIS, June 16 - French Budget Minister Alain Lambert affirmed on Monday that the government's current forecast of 1.3 percent growth this year was still viable despite a continued downturn. That forecast replaced in March a more ambitious target of 2.5 percent. Lambert put at five billion euros the shortfall in tax receipts corresponding to the downgrade but pledged the government would compensate by cutting its spending.
"We are in June, so only half of the year has run. May was a difficult month, but everyone agrees that the second half of the year will be better than the first, meaning this forecast of 1.3 percent is still possible." Asked what the impact on France's public deficit would be of the slowdown in growth, Lambert said: "We have an idea of the fiscal shortfall linked to the slowdown in growth, it is perhaps of the order of five billion euros. "That's too much and it is an encouragement for us to cut spending," he said, insisting that the government remained committed to cutting taxes over the period of its 2002-2007 legislature as pledged by President Jacques Chirac. Separately, the finance ministry declined to comment on a report in Le Figaro that a spending freeze planned for 2004 could be extended to 2005 and 2006.
The newspaper said Lambert would propose the extension to a parliamentary finance committee on Tuesday before parliamentary deputies debate the issue on Thursday. The government is bracing for its budget deficit to swell to 3.4 percent of gross domestic product next year, even as it pledges to bring it back down below a European Union limit of three percent of GDP. France's budget deficit swelled to 39.73 billion euros in the four months to end-April, almost doubling the level it hit at the end of March amid a drop in company tax revenues. The government is forecasting that an end-year recovery will pave the way for growth of 2.0-2.5 percent in 2004.//