December 19, 2018 / 5:20 PM / a year ago

UPDATE 1-France targets no cut to structural deficit next year - govt source

(adds figures on previous structural targets)

BRUSSELS, Dec 19 (Reuters) - France plans no reduction of the structural deficit next year in a revised budget meant to quell social protests that have rocked the country in past weeks, a government official said on Wednesday.

The move is likely to put further pressure on the European Commission, which monitors EU countries’ compliance with the bloc’s fiscal rules.

France had already said on Sunday that its headline deficit could grow to 3.2 percent of output from 2.8 percent initially planned. EU rules foresee a 3 percent ceiling, although they are flexible.

Brussels is also closely monitoring structural deficits, which exclude one-offs and business cycle effects, and if kept under control prevent public debts from expanding.

France was required to reduce its structural deficit by 0.6 percentage points next year. It had initially targeted a 0.1 percent cut this year and a 0.3 percent reduction in 2019, but in the revised deficit is now envisaging no cut at all, the French government source said.

EU rules usually allow for a deviation of 0.5 percentage points from fiscal targets, at most.

On Wednesday, French Finance Minister Bruno Le Maire met EU economic commissioners Valdis Dombrovskis and Pierre Moscovici to discuss the budget. After the meeting he said he believed Brussels understood Paris arguments to boost spending.

Earlier on Wednesday the Commission decided not to launch disciplinary proceedings against Italy after Rome cut its headline deficit to 2.04 percent of output.

Brussels accepted Italy’s plans not to cut its structural deficit next year, despite a requirement of a 0.6 percent cut.

Italy has a much larger public debt than France. (Reporting by Francesco Guarascio; Editing by Angus MacSwan)

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