Tuesday

22nd Jun 2021

'Over optimistic' France needs two more years to correct deficit

  • Rehn - France's growth projections were "over optimistic" (Photo: ec.europa.eu)

France has moved centre stage in the crisis, after EU economic affairs commissioner Olli Rehn said that the country would fall into recession in 2013 and needs two more years to bring down its budget deficit.

Presenting the Commission's Spring Economic Forecasts on Friday (3 May), Commissioner Rehn described Paris's forecasts, based on a mere 0.1 percent growth rate, as "overly optimistic."

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The eurozone's second largest economy would run deficits of 3.9 percent in 2013 and 4.2 percent in 2014, he said, calling on Francois Hollande's government to draw up a "front loaded" package of cuts and labour market reforms to stop "persistent deterioration of French competitiveness."

For its part, Paris maintains that it will reduce its deficit to 2.9 percent in 2014, fractionally below the 3 percent limit in the EU's Stability and Growth Pact.

Hollande in March announced that an additional €20 billion worth of tax rises and €10 billion in spending cuts would be included in his budget plans but said no further cuts would be made.

According to the commission figures, the eurozone economy will contract by 0.4 percent in 2013, with growth of 1.2 percent projected for 2014. Crisis-hit Cyprus, which has now finalised a 10 billion bailout, is set to be worst hit by recession with an 8.7 percent fall in output.

Meanwhile, the average national debt pile is expected to peak at 96 percent of GDP in 2014, with six countries - Belgium, Ireland, Greece, Italy, Cyprus and Portugal - having debts larger than their annual economic output.

Rehn indicated that Spain would also be given an additional two years to bring its deficit down to the 3 percent threshold, while Slovenia would also need more time.

However, there was better news for Latvia, Lithuania and Romania, who are set to leave the so-called Excessive Deficit Procedure (EDP) for countries in breach of the debt and deficit limits.

Hungary as well as Italy - previously regarded as a weak link in the eurozone - will also move off the EU's economically endangered list in 2013 if they continued reform programmes, Rehn added.

Rehn also said that the UK, which ran the second largest deficit across the EU behind Ireland in 2012, had no room for manoeuvre. "There is no case for discretionary fiscal loosening in the UK," he said.

The grim statistics come a day after the European Central Bank cut headline interest rates to an historic low of 0.5 percent, with the Frankfurt-based bank adding that it was "ready to act if needed" to shore up the single currency.

EU criticises France on economic 'imbalances'

France and Slovenia moved a step closer to the eye of the eurozone storm after being censured by the European Commission for having "macro-economic balances."

Eurozone recession to continue in 2013

The eurozone economy will shrink by a further 0.3 per cent in 2013, the European Commission has said. The bloc will have to wait until 2014 before seeing economic growth.

News in Brief

  1. UEFA: No rainbow 'pride' stadium illumination at Hungary match
  2. Italian PM calls to move Euro 2020 final from London to Rome
  3. UN warns of 'cascade of human rights setbacks'
  4. Minister urges Belgians to ignore speculation over dead soldier
  5. Swedish government toppled in no-confidence vote
  6. EU takes aim at British TV and film perks
  7. Iran nuclear deal: President-elect Raisi issues warning over talks
  8. EU agriculture spending 'failed' to reduce farming emissions

Vietnam jails journalist critical of EU trade deal

A journalist who had demanded the EU postpone its trade deal with Vietnam until human rights improved has been sentenced to 15 years in jail. The EU Commission says it first needs to conduct a detailed analysis before responding.

Stakeholders' Highlights

  1. Nordic Council of MinistersNineteen demands by Nordic young people to save biodiversity
  2. Nordic Council of MinistersSustainable public procurement is an effective way to achieve global goals
  3. Nordic Council of MinistersNordic Council enters into formal relations with European Parliament
  4. Nordic Council of MinistersWomen more active in violent extremist circles than first assumed
  5. Nordic Council of MinistersDigitalisation can help us pick up the green pace
  6. Nordic Council of MinistersCOVID19 is a wake-up call in the fight against antibiotic resistance

Latest News

  1. Latest EU sanctions to bite Belarus dictator's income
  2. Libyan detention centres must end, EU says
  3. Poland and Hungary sanctions procedure back after pandemic
  4. Sánchez risks 'betrayal' call with pardon for jailed Catalans
  5. EU a 'Wild West' for China's unsafe toys, gadgets and clothes
  6. 'You'll never walk alone' - our message to women
  7. Too soon to lift EU sanctions on Burundi, NGOs warn
  8. EU to wage economic war on Belarus dictator

Join EUobserver

Support quality EU news

Join us