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public deficit

The French government has revealed the country’s public debt will hit a record 95.1% of GDP in 2014, above previous estimates, and up from 93.4% in 2013.

The figure was revealed as the country unveiled its budget for next year.

The debt should fall back in 2015, and repeated its aim to bring the public deficit below 3% that year, the EU’s deadline for doing so.

The government also said there will be some tax increases for households, but other tax reductions for businesses.

In addition, the budget focuses on tightening public spending, with some 15 billion euros in savings planned, as part of a plan to cut some 18 billion euros off the deficit.

France public debt will hit a record 95.1 percent of GDP in 2014

France public debt will hit a record 95.1 percent of GDP in 2014

Debt servicing costs will rise to 46.7 billion euros, compared with 45 billion euros in 2013.

The 2014 budget is based on a growth forecast of 0.9%, lowered from a previous 1.2% forecast, with just 0.1% in growth forecast for this year.

But an economist has warned that next year’s growth figure was no cause for optimism.

“We can’t talk about a recovery as long as economic growth is around 1%,” said Eric Heyer, an economist with the French Observatory for Economic Forecasts.

“Since today, we produce less than five years ago, we are still in recession. That’s the real definition of a recession.

“The real rebound will be when we have a production level well above 2007 and when the economy has started to create jobs again. That’s not in the government’s scenario.”

In other measures, there will be a change in corporate tax policy, with a new levy being introduced based on operating profits.

The much-heralded 75% tax rate on salaries of more than 1 million euros a year will be introduced.

However, this tax will be paid by firms rather than employees.

France is the eurozone’s second largest economy after Germany.

Meanwhile, France will issue 174 billion euros in medium and long-term debt in 2014, compared with an estimated 169 billion euros this year.

The US economy grew more than expected in the third quarter, official figures showed.

The world’s largest economy expanded at an annualized rate of 2% in the third quarter, the Commerce Department said.

The jump was partly due to a large increase in government spending.

The figures are one of the last pieces of important economic data before the US presidential election between Barack Obama and his challenger Mitt Romney on 6 November.

Federal government expenditures and gross investment increased 9.6% compared with the previous quarter, while national defence spending rose by 13%. The Commerce Department said there was a jump in personal consumption as well.

A drought in the US, which was the worst for 50 years, cut farm output and took 0.4 percentage points off the GDP figures, the Commerce Department said.

With more than 20 million Americans unemployed and a huge public deficit, the economy has become one of the central issues of the campaign.

The US has now been growing for more than three years, since June 2009.

“While we have more work to do, together with other economic indicators, this report provides further evidence that the economy is moving in the right direction,” said Alan Krueger, chairman of PresidentBarack  Obama’s Council of Economic Advisers.

But the Romney camp was not impressed.

“Slow economic growth means slow job growth and declining take-home pay,” Mitt Romney said in a statement.

“This is what four years of President Obama’s policies have produced.”

Speaking at a rally on Friday in the state of Iowa he said the growth figure was disappointing and that he could do better.

Mitt Romney has repeatedly challenged President Barack Obama’s record, saying ”we have not made the progress we need to make”.

“If the president were re-elected, we’d go to almost $20 trillion of national debt. This puts us on a road to Greece,” Mitt Romney said during the second presidential debate.

Barack Obama replied that his opponent did not have a five-point plan to fix the economy, but ”a one-point plan”.

Last month, the US unemployment rate fell to 7.8%, down from 8.1%, its lowest since January 2009 when Barack Obama’s term in office began.

Nigel Gault, chief US economist at IHS Global Insight, said: “There is prospect that we could do better next year if we could clear up some of the uncertainties, particularly the fiscal cliff.

“A lot of the ingredients for stronger growth are falling into place, particularly the gradual easing of credit conditions and the improvement in the housing market.”

The “fiscal cliff” refers to automatic tax hikes and government spending cuts that were agreed by Democrats and Republicans during the last budget face-off. They will drain about $600 billion out of the economy next year, possibly plunging the US economy into unless action is taken by Congress.

Chris Williamson, chief economist at financial research firm Markit, said there was no certainty that this pace of growth would be maintained: “It remains too early to tell whether growth will accelerate or slow in the fourth quarter.

“However, it seems unlikely that the consumer mood will continue to brighten if not supported by evidence that the corporate sector is also seeing stronger growth, suggesting there are downside risks and the GDP growth rate could slow from the third quarter’s 2% pace.”

To help get the US economy back on track, the US Federal Reserve in September restarted its policy of pumping money into the economy via quantitative easing. The Fed pledged to buy $40bn of mortgage debt a month, with the aim of reducing long-term borrowing costs for firms and households.

“Growth was fairly resilient,” said Christopher Vecchio, a currency analyst at DailyFX, but “nevertheless, this is still not the stable recovery the Federal Reserve is looking for”.

Recent housing data has also shown some encouraging signs of recovery, analysts say.

Sales of existing homes and housing construction have picked up and the main home price index has risen consecutively for three months.

House prices have rebounded in some areas, while mortgage rates are expected to stay at record lows because of low interest rates.

The Fed has vowed to keep rates at the current levels of close to zero until 2015.

The economy grew by 1.3% in the previous quarter. The US states its growth in annualized terms, meaning that its quarterly growth rate is extrapolated as if it was growing at that pace for the whole year.

Figures for the eurozone have not yet been released but Germany is expecting a “noticeable expansion” and debt-ridden nations like Spain and Greece will likely have shrunk again.

China, the world’s second-biggest economy, also uses an annualized rate of growth. It expanded 7.4% in the third quarter.