The FINANCIAL -- France's
contribution to the euro zone's permanent rescue fund, the European
Stability Mechanism, will increase the country's debt burden by EUR6.5
billion in 2012, bringing it to 89.1% of gross domestic product, a
finance ministry official said Wednesday.
According to London Stock Exchange, the debt forecasts were given as the government detailed a revised budget bill for 2012 to incorporate a lower growth forecast of 0.5% of gross domestic product instead of 1% of GDP.
The budget revisions outlined at the government cabinet meeting Wednesday also included President Nicolas Sarkozy's plans to increase value-added tax to fund a cut in payroll taxes.
In December, European Union heads of state agreed to bring forward the implementation of the ESM, which, unlike its predecessor--the European Financial Stability Facility--involves governments paying in capital to the rescue fund.
The ESM will now be active in July this year, instead of 2013 as originally planned, and France will pay in two tranches of its capital contributions, estimated to be just over EUR3.2 billion a year.
Including contributions to European bailout programs and the ESM, France's debt as a percentage of GDP will peak at 89.3% in 2013, before falling to 88.3% of GDP in 2014 and 86.2% in 2015, according to the government's forecasts, which are based on GDP growth of 2% from 2013 onwards.
Excluding contributions to European bailout programs, debt as a percentage of GDP will peak in 2012 at 86.7% of GDP, before falling to 86.6% in 2013 and 85.4% in 2014.
The French finance ministry noted that the contributions to European bailouts don't change France's deficit as defined under the EU Maastricht Treaty. France's objective of reducing the deficit to 4.5% of GDP is therefore unchanged, it said.
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