PARIS (MNI) – France’s central government deficit at end-March
amounted to E29.4 billion, down E4.2 billion from the previous-year
level, the Budget Ministry said Thursday.

Outlays in 1Q totaled E87.2 billion, E4.9 billion more than a year
ago. This was mainly due to a new financial management system that
allowed ministries to hit the ground running at the start of the year,
the ministry explained.

Revenues through March were E2.9 billion higher on the year at
E68.2 billion, due in part to the one-off sale of new airways
frequencies at the start of the year. Thanks to the dynamism of VAT and
income tax receipts, tax revenues alone were up E1.9 billion or +3.0% on
the year, in line with budget projections, the ministry said.

The full-year deficit target of the outgoing government was E78.7
billion plus a contribution of more than E6 billion to the EFSF bailout
fund. The overall public deficit ratio was to be trimmed by 0.8 point of
GDP to 4.4%.

As president-elect Francois Hollande has pledged to stick to the
public deficit target of 3% for next year and is well aware that
financial markets are on the alert for any potential slippage, he is
likely to take a cautious approach to the tax reforms planned this
summer.

One of the first moves of the new government will be to demand an
audit of public finances by the Accounting Court. While this would allow
it to blame its predecessor for any risks revealed, it could hardly be
used as an excuse in the eyes of investors.

According to the business daily Les Echos, the Budget Ministry now
estimates the upside risks on the spending side at around E1 billion,
compared to a reserve fund of more the E5 billion. Debt service charges
have so far been less than generously projected last year. Budget
Minister Valerie Pecresse asserted Monday that accounts to dates were
“totally in line” with budget targets — comments confirmed in today’s
budget report.

Most of the tax hikes planned by Hollande, notably those on higher
incomes, will not take effect until next year, although the advanced
corporate tax payment at year’s end could be affected.

–Paris newsroom +331 4271 5540; Email: ssandelius@marketnews.com.

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