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EU sets France tough new deficit targets, Sapin says can be reached

French Finance Minister Michel Sapin with his Greek counterpart Yanis Varoufakis in Paris at the beginning of the month Reuters/Philippe Wojazer

The European Union has tightened targets for the reduction of France’s budget deficit two days after extending the deadline to reduce it to below three per cent for another two years. Finance Minister Michel Sapin described the new requirements as “demanding” but said they will be reached.

On Wednesday the European Commission disappointed fiscal hardliners by extending Fracen’s deadline for the third time and letting Italy and Belgium off the hook completely.

But on Friday it told Paris to cut the difference between spending and revenue to 4.0 per cent in 2015, 3.4 per cent in 2016 and 2.8 per cent in 2017.

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The first two years are tougher than France's own targets of 4.1 per cent in 2015 and 3.6 per cent in 2016.

Speaking during a visit to Slovenia, Sapin described the targets as “demanding” but “realistic” and said they would be met and would not limit the “timid growth” currently developing.

The Commission estimated 2015’s savings required at 0.5 per cent of GDP, up from the current 0.3 per cent, meaning savings of at least 4.0 billion euros.

Paris must find an even tougher 0.8 per cent in 2016 and 0.9 per cent in 2017, according to the commission.

"France should step up efforts to identify savings opportunities across all sub-sectors of general government, including at social security and local government level and use all windfall gains for deficit reduction," it said in a statement.