PARIS - France has only a slim chance of meeting ambitious budget targets intended to stabilize the country's economy and meet European requirements, the country's auditor warned Tuesday.
A pillar of the 17 group of European Union countries that uses the euro, France is the world's fifth-largest economy. Investors and economists have been scrutinizing the country's ability to control its finances and make it more competitive on a global stage.
Tuesday's report was the first national audit under Socialist President Francois Hollande, who has argued that new spending was needed to stimulate growth. The report, however, said that health care and other public expenses were rising while tax revenues were failing to keep up.
The budget tensions played out on a broader landscape of rising unemployment and fears that French industry will fall further behind as its economy slumps. On Tuesday, French workers for tiremaker Goodyear fired flares and paint bombs and riot police answered with tear gas in a standoff over layoffs.
The administration has laid out a series of deficit-reduction targets to bring France in line with the limit set by the European Union of 3 per cent of the country's annual economic output by 2014. But Tuesday's report predicted that the deficit could rise as high as 4.5 per cent compared to a eurozone average of 3.3 per cent.
Didier Migaud, the leader of the France's state auditing council, said France needs to continue its efforts to curb spending and focus on getting competitive.
"France's situation compared to the rest of Europe has improved little because our partners are making efforts too ... much remains to be done," Migaud told BFM-TV.
He noted that France is the second-biggest state spender among the 34 industrialized and emerging countries who are in the Paris-based Organization for Economic Cooperation and Development. "A lot of (state) money is insufficiently targeted, badly spent ..." he said.
The audit added that French debt was likely to grow beyond 90 per cent of the country's economic output for 2012.
In response, the French president promised to lower growth predictions in coming days.
"There's no point in having goals if they can't be achieved," Hollande said.
Despite the warning, Hollande's government is likely to come under pressure to spend more — not less. The French military launched a campaign in Mali with costs estimated at €50 million and rising. And unemployment continues to mount, forcing the government to pay out benefits to jobless workers.
The report said rampant government waste is contributing to the problem. Among things the audit singled out was a controversial project to limit environmental damage to the landmark Mont-Saint-Michel monastery on the Atlantic Coast which it said was poorly managed and was unclear who will foot the bill for the €185 million plan.
It also criticized payroll policies and perks at state-controlled utility giant Electrite de France, saying salaries continued to grow over the last decade even as private sector salaries stagnated amid economic slowdown.
The report also recommended cuts to subsidies for newspapers and magazines, estimating that the French government spent 5 billion euros from 2009-2011 on subsidies with "limited results."
Angela Charlton in Paris contributed to this report.