France

France is the world’s fifth-largest economy with a GDP of $2.58 trillion, substantial agricultural resources, a large industrial base, and a highly skilled work force. A dynamic services sector accounts for an increasingly large share of economic activity and is responsible for nearly all job creation in recent years. Government economic policy aims to promote investment and domestic growth in a stable fiscal and monetary environment. Creating jobs and reducing the high unemployment rate has been a top priority. France joined 10 other European Union countries in adopting the euro as its currency in January 1999.

France has been very successful in developing dynamic telecommunications, aerospace, and weapons sectors. Despite significant reform and privatization over the past 15 years, the government continues to control a large share of economic activity: Government spending, at 56.2 per centof GDP in 2010, is among the highest in the G-7. The government continues to own shares in corporations in a range of sectors, including banking, energy production and distribution, automobiles, transportation, and telecommunications.

The OECD upgraded its forecast for French GDP growth to two per cent in 2011. The International Monetary Fund (IMF) left unchanged its forecast at 1.6 in 2011 and 1.8 per cent in 2012. France’s government itself cut its growth forecast for next year to one per cent, from 1.75, but most private economists still consider that far too optimistic. Meanwhile, the European Commission has issued a new and lower projection for economic growth in 2012 of just 0.6 per cent in 2012 — and that’s before taking into account the new austerity package recently proposed by President Sarkozy.

The French government has presented a tough 2012 austerity budget, promising to balance strained public finances but warning that the Eurozone debt “turbulence” could yet derail timid growth. The government is to stick to the plan to cut the budget deficit to 3% of GDP in 2013. The proposed austerity measures aimed to reduce the budget deficit by €6 billion to €8 billion ($8 to $11 billion), after the government reduced its forecast for French economic growth to one per cent in October. The goal is to produce a balanced budget by 2016.

The economics minister has said that reducing budget deficits would help ensure sustainable growth. The government aims to continue budget cuts through the attrition of civil servants. Budget spending is set to increase 0.8 per year (excluding inflation) between 2011 and 2014, compared to 2.5 per cent per year between 2009 and 2010. The government’s target for the budget deficit is three per cent of GDP for 2011 and 4.6 of GDP for 2012. But Moody’s said that slowing growth combined with rising interest rates would make it hard for France to hit its target of cutting the fiscal deficit from an estimated 5.7 at the end of this year to an EU ceiling of three per cent by 2013.

The budget forecasts that the cost of servicing the public debt will come in at 48.8 billion euros ($66.5 billion) in 2012, down from the last government estimates in July of 50 billion euros. But the debt payments will still account for the largest slice of the budget. France’s public deficit will reach 5.7 of gross domestic product this year, before dropping to 4.5 in 2012 and then to the European Union limit of three in 2013 and two per cent in 2014. For the first time, the government also undertook to bring the deficit down to one per cent in 2015.

France’s total, accumulated debt will be higher than previously expected, largely because of its contribution to rescue funds for bailedout the Eurozone countries such as Greece, Portugal and Ireland. These accumulated debts are expected to reach a record 85.5 of GDP this year and will hit 87.4 per cent in 2012, half a percentage point higher than the previous estimate. Debt will be 87.3 of GDP in 2013 before dropping to 86.2 in 2014 and 84.1 per cent in 2015 — leaving it still well above the EU ceiling of 60 percent. The European Commission predicts that France’s debt burden will climb to almost 92 per cent of GDP in 2013.

Belgium

Belgium is a highly developed market economy. With a geographic area about equal to that of Maryland, and a population of 10.8 million, Belgian per capita GDP ranks among the world’s highest. In 2010, per capita income (PPP) was estimated to be €32,592 (approx. $43,220). With exports and imports approximately equal to GDP, Belgium depends heavily on world trade. Belgium’s trade advantages are derived from its central geographic location and a highly skilled, multilingual, and productive work force. The federal government ran large primary surpluses in recent years until 2009. Public debt remains high, at about 97.2 of GDP at the end of 2010. GDP growth in 2010 was estimated to be 2.1 per cent.

Belgium’s growth prospects, like the rest of the debt-saddled 17-nation eurozone, have deteriorated in recent months. In contrast to growth of 2.4% this year, the Belgian economy may decelerate to 1.6% in 2012, according to the Federal Planning Bureau (FPB). The Belgian economy can easily cool within 2012 as a result of less strong overall performance in the three major macroeconomic elements – imports, personal consumption and gross investment. But the most recent data from the four largest banks in Belgium reveals that the growth rate would be 1.2 per cent in 2012. The International Monetary Fund is ranking Belgian GDP growth for the approaching year at 1.5 per cent.

Belgium, which has been without a full-time government for 15 months, faces slower economic growth next year that will compound its difficulty in meeting a budget- deficit reduction target even as borrowing costs soar. The European Commission published new growth figures showing that Belgium’s economy would expand by 0.9 next year, as against the 2.2 per cent previously predicted by the EU six months ago. The National Bank of Belgium left its 2.2 per cent growth forecast for 2012 unchanged. The planning bureau raised its 2011 growth forecast to 2.4 from 2.2 per cent. The central bank retained its 2.6 per cent projection.

Belgium’s budget gap will widen to 17.7 billion euros under the lower growth forecast and leave the government 6.9 billion euros short of reaching its goal of trimming the deficit to 2.8 per cent of gross domestic product in 2012. The general government budget deficit for 2012 is set at a maximum of 2.8 of GDP. In 2011 the deficit is expected to be around 3.6 per cent of GDP. However, Brussels has asked the Belgian authorities to get its public finances back on track and deliver a 2012 budget cutting its deficit by the middle of next month. Very clearly Belgium needs to step up efforts to meet fiscal targets for next year.

Luxembourg

Luxembourg has a relatively open and stable economy. It has experienced a severe recession as the result of the international financial crisis. Output contracted sharply and unemployment has risen. Luxembourg’s economy was heavily exposed to the downturn in world trade and the financial centre has been strongly affected. The recovery is now underway. Growth in the coming years is likely to be lower than before the crisis, although living standards will remain high. The fiscal position has deteriorated rapidly due to a sharp fall in tax receipts from the financial sector, substantial fiscal stimulus measures and rising spending.

Strong domestic demand boosted the Luxembourg economy in 2010. GDP growth of 2.7 was higher than in most other Member States, but remained far below the 4.7 recorded on average between 2000 and 2007. Provisional figures for the first two quarters of 2011 show only subdued growth, with the quarter-on-quarter increase in GDP estimated at about 0.25 in both Q1 and Q2. GDP is estimated to grow by two per cent in 2011. It is expected to contract by 0.4% in 2012, and grow by 0.7% in 2013. Inflation is expected to stand at between 2% to 2.5%.In recent months unemployment started to rise again despite the strong job creation. With a gloomier economic outlook for 2012, unemployment is projected to rise further to 4.8 per cent.. In 2013 (national) employment will increase again sufficiently to bring down the unemployment rate, although only marginally. Wages are expected to grow by 4.5% on average in 2012. This will strongly push up unit labour costs, accelerating to a 5.3% increase in 2012. The lower inflation rates foreseen for 2012 and 2013 will somewhat slow the impact of the automatic indexation mechanism, so that wage growth will decelerate to 3.3 per cent in 2013. Unit labour costs will increase by about the same rate in 2013.

Luxembourg’s Finance Minister has recently submitted the country’s 2012 budget bill, pertaining to revenues and expenditure in the coming year. The 2012 budget bill provides for tax revenues of EUR12.5bn (up five per cent compared to the 2011 budget). In 2009, a budget deficit of five per cent resulted from government measures to stimulate the economy, especially the banking sector, as a result of the world economic crisis. This was however reduced to 1.4% in 2010. .According to recently released revised public finance data, the general government deficit in 2010 was only 1.1 of GDP instead of 1.7 per cent, mainly thanks to upward revisions of revenue.

In 2011, revenues were particularly buoyant over the first half of the year. The budget balance in 2011 is expected to show a deficit of around 0.6 per cent of GDP. With a gloomier economic outlook, the deficit is expected to deteriorate to around one per cent of GDP in 2012, which is still one of the lowest in the EU. In 2013, the budget balance will slightly improve to a deficit of around 0.9 per cent. Luxembourg’s public debt is currently around 18 per cent of GDP, way below the fixed public debt threshold in the EU of 60 per cent.