REPEAT: MNI: France 2017 EDP Exit Still Far From Certain

Repeats Story Initially Transmitted at 13:15 GMT Feb 12/08:15 EST Feb 12

--Eurostat Calls Could See Deficit Above 3% Of GDP

By Jean Comte

     BRUSSELS (MNI) - France's exit from the European Union's Excessive Debt

Procedure is far from certain, despite the optimism of the French government,

MNI understands.

     Paris repeated in early January that it brought the public deficit to

around 2.9% of the GDP in 2017, just under the 3% threshold required by the EU

treaties. But the definitive figure will only be known in April, when it is

published by Eurostat -- the EU's independent statistical agency. 

     Eurostat is currently reviewing the 2017 French public accounts, and has

still to make a couple of technical decisions which could jeopardize the French

strategy, MNI has been told.

     One regards the 2017 cancellation by a high court of a tax created in 2016

on corporate dividends. That forced the government to reimburse 10 billion

euros. The finance ministry decided to attribute half of the reimbursement

expense in the 2018 budgetary year, but Eurostat could decide to bring it all

back into 2017.

     Also, Eurostat must decide whether the 2017 recapitalisation of the

State-owned company Areava cost 0.1 or 0.2% of the GDP.

     Either or both decisions could bring significant variations to overall 2017

funding costs for France -- totalling around 0.3% of the GDP -- and would

certainly be enough to push the deficit back above 3%.

     Eurostat is expected to decided on both cases in the Spring, publishing the

final deficit figure on the April 23.

     --LONGER TERM PERSPECTIVE

     Beyond the deficit for 2018, ending the French excessive deficit procedure

will also depend on whether Paris has a "stable" fiscal outlook for the next

years. That might require further affirmative action than currently undertaken

by France

     Officials told MNI that the French government is currently pursuing a

"conjunctural" strategy, one relying more on good news and the EU's generally

positive economic position, rather than on strong national actions on public

finances. That means that any bad news, or sudden economic downturn, would

jeopardize the long term sustainability of public finances.

     The EU Commission also forecast a return to 3% from 2019 onward, due to the

"delayed effects" of several tax cuts -- something that definitely negates the

chances of a stable outlook.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com