(Adds quotes from budget minister)
By Emile Picy
PARIS, June 24 (Reuters) - France does not expect to meet a promise to reduce its deficit to the European Union limit of 3 percent of gross domestic product in 2012, the government said on Wednesday.
The deficit will be between 5.0 and 5.5 percent of GDP in 2012, down from 7.0 to 7.5 percent in 2009 and 2010, according to new forecasts.
Economy Minister Christine Lagarde said earlier this month France was aiming for a 2012 shortfall of under 3 percent.
"Returning to 3 percent in 2012, given the information which is currently available, is not achievable without an extremely strong rebound in growth," Budget Minister Eric Woerth said, presenting the new outlook to parliament.
The government is expecting the economy to shrink 3 percent this year before returning to 0.5 percent growth in 2010.
It also expects debt to rise to 77 percent of GDP in 2009 and to 88 percent in 2012, far higher than the EU limit of 60 percent.
The government's outlook seemed optimistic compared with other recent forecasts. Earlier on Wednesday the OECD said it expected France's debt to reach 86 percent of GDP next year, higher than the official forecast of 83 percent.
The OECD also forecast a fiscal shortfall of 7.9 percent.
France has led the charge for a more relaxed interpretation of the EU's fiscal rules to allow countries more leeway to spend their way out of the financial crisis.
GOOD DEFICITS, BAD DEFICITS
President Nicolas Sarkozy ruled out tax rises and austerity measures to fight the economic crisis and said he would borrow more to finance investment.
He also said it was important to distinguish between "bad deficits" that arise from recurring expenses linked to structural problems in the economy and "good deficits" that pay for investment to help the economy weather the financial crisis.
The idea of "good" and "bad" deficits has irritated officials in Germany, where parliament has passed a law setting new borrowing limits.
France has promised to hold spending levels next year and has tried to reassure Germany by restating its commitment to the EU's growth and stability pact which underpins the euro.
"We are sticking to the spirit of the pact: we will do our best effort to clean up public finances without stopping the return to growth and preparing tomorrow's growth, to get back under 3 percent as soon as possible," Woerth said.
German officials have also expressed concern about inflation.
"I would like to finish by excluding a 'so-called' miracle solution, that we hear about the place. That it's inflation that will get us out of this business as if by magic," Woerth said.
"This solution is not realistic or desirable ... It would call into question the foundations of European construction, the euro and the Franco-German relationship."
Analysts say rising debt and deficits are not an obstacle to France raising money on capital markets.
"France is financing itself very well with the current system," said Dominique Barbet, economist at BNP Paribas. French debt auctions have continued to see reasonable demand. On Tuesday investors snapped up 6 billion euros of a syndicated bond, more than initial guidance of 4 billion euros. (Writing by Anna Willard; Editing by David Stamp)