France's 2026 deficit target at risk as growth outlook cut, minister says

PARIS, July 7 (Reuters) - France is at risk of missing its deficit-reduction target this year as the growth outlook deteriorates and may need to take additional savings measures, Finance Minister Roland Lescure said on Tuesday.

In a mid-year update on the public finances to lawmakers, Lescure said he had cut the government's growth forecast to 0.7% from 0.9% after a weak start to the year and the impact of the Iran war.

Slower growth is weighing on France's tax revenue, while the government has had to provide targeted support to sectors hit by higher energy costs linked to the conflict.

"Clearly, our target of a public deficit at 5% (of gross domestic product) is now difficult to achieve. We will do everything we can to get as close to it as possible," Lescure told journalists after meeting with lawmakers.

Budget Minister David Amiel said an additional €3 billion ($3.43 billion) of spending cuts or freezes would be needed to offset unplanned expenditure, on top of €6 billion in emergency savings measures already implemented.

Local government spending also poses a risk to the deficit target, with the finance ministry identifying a potential €2 billion overshoot. The second half of the year will be crucial, Lescure said.

The strain on the public finances complicates the government's task of drafting its 2027 budget, due in September, amid growing concern that France's €3.5 trillion debt burden could continue to rise as the country heads towards next year's presidential election.

($1 = 0.8744 euros)

(Reporting by Leigh Thomas; Editing by Joe Bavier)