French govt spokesman warns of oil price risks

By Swaha Pattanaik

PARIS (Reuters) – Very high oil prices risk weighing onFrench economic activity and any joint initiative that wouldhelp drive them lower would be a step in the right direction,French government spokesman Jean-Francois Cope said on Sunday.

His comments chime with British Prime Minister Tony Blair’scall on Saturday for efforts to reduce oil prices, which havescaled record peaks as the price of a barrel of U.S. crude hit$60.95 earlier this week.

“The big negative factor is the oil price … the slightlymore positive factor is the rise in the dollar,” Cope toldRadio J, referring to the French economic outlook.

“Today, (oil) prices are at such high levels that thisshould not last forever. Any concerted initiative which wouldhelp lower the price of oil would clearly be a move in theright direction,” he added.

Britain, Germany and Canada have signaled that oil pricesare likely to be on the agenda when leaders from the Group ofEight nations meet in Scotland next week.

The G8 comprises the United States, Canada, Japan, Germany,Italy, France, Britain and Russia.

Cope repeated the government’s growth predictions for 2005and 2006 and its intention of bringing the budget deficit below3 percent of gross domestic product this year, but noted therewere some risks.

RISKS TO GOALS

French Finance Minister Thierry Breton last month said theeconomy would at best grow by 2 percent this year, cutting theforecast from a previous range of 2.0 to 2.5 percent. Growth in2006 is forecast between 2.25 and 2.75 percent.

Despite weaker-than-expected economic activity, Breton hasreaffirmed France’s plan to bring its 2005 deficit below theEuropean Union cap of 3 percent of GDP, which it has brokenevery year since 2002.

Cope said the government was working to reach this goal butadmitted that “there are a certain number of risks.”

Among those risks are spending on social security and thepossibility that tax receipts could undershoot expectations.

Cope said tax receipts from companies could turn out to beas much as 4 billion euros ($4.83 billion) below the previousforecast.

However, he said value added tax receipts and income taxreceipts were so far in line with expectations and stressedthat the government was keeping a tight grip on publicspending.

He also sought to dispel gloom about the outlook for theeuro zone’s second-biggest economy: “The worst is behind us.”

Cope said there would be a very positive economic impact interms of job creation and investment if the Paris bid to hostthe 2012 Olympic Games were successful.

In a wide-ranging interview, Cope also firmly fended offany suggestion that Breton had been weakened after policeearlier this week searched offices at his ministry inconnection with an investigation into the past accounts ofchemical firm Rhodia.

Breton, who headed the firm’s audit committee during1999-2002 — the period for which its accounts are beinginvestigated for suspected inaccuracies — has denied he didanything wrong and vowed to fight his corner. ($1=.8275 Euro)