* Huge French deficit slightly better than expected in 2010
* Economic growth edges up, investments to kick in
(Adds debt data paras 7 and 8, market reaction)
By Crispian Balmer
PARIS, Jan 20 (Reuters) - France's public deficit will be slightly better than previously expected in 2010, but will still come in at its highest level in at least half a century despite a return to economic growth, the government said on Wednesday.
In its revised budget forecast, the economy ministry said the deficit would hit 8.2 percent of gross domestic product (GDP) this year after reaching 7.9 percent in 2009.
When the government unveiled its budget last September it predicted a deficit of 8.5 percent in 2010 and 8.2 percent in 2009. (Double click on [ID:nPAB008113] for the budget table).
The government said part of the improvement in the budget outlook came from a marginally better economic environment, with the economy seen growing 1.4 percent this year from a previous forecast of 0.75 percent.
The economy was seen contracting 2.25 percent in 2009.
"These are just forecasts, you must understand the future is very uncertain. We're in a fragile and uncertain world," Budget Minister Eric Woerth told reporters.
Underlining the difficulties facing French state accounts, France's national debt was due to jump to 83.2 percent of GDP this year against 77.4 percent in 2009.
This was lower than the 84 percent originally forecast but is still almost 20 percentage points up on 2007 levels, showing how the recent economic downturn and continued high state spending have punched a hole in the nation's balance sheet.
Bond market dealers said the lower forecast played in to a positive morning for European government debt markets.
INVESTMENT HOPES
The central government budget deficit will hit almost 150 billion euros ($213.1 billion) in 2010 against 138 billion in 2009, higher than the previous forecast of 117 billion because of new investments of 35 billion euros that were announced in December aimed at research and development.
However, the economy ministry said that less than a third of this investment programme would weigh on 2010 accounts in terms of the European Union's deficit calculations.
"This is accounting. It isn't poetry," said Woerth, adding that the spending programme would boost France's GDP by 0.3 percentage points a year over the next decade.
The European Union has not yet signed off on the French budget programme and Paris did not update its official economic forecasts beyond this year.
Ministers have indicated that by 2013 they hope to reduce the deficit to below the 3 percent of GDP ceiling, as demanded by the EU's Maastricht Treaty.
However, French officials are clearly concerned about France's image in the financial markets, and the government will hold a seminar next week to review its deficit problems.
President Nicolas Sarkozy, looking to shore up accounts, has also said he will launch a significant reform of the pensions system later this year -- much earlier than originally planned.
Woerth said the social security budget, which includes pensions, would run up a 36.6 billion euro deficit this year from around 25 billion euros in 2009. (Additional reporting by Jean-Baptiste Vey and William James; editing by Stephen Nisbet)