Sunday

25th Sep 2016

'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."

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

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.

Investigation

Diesel cars still dirty, despite huge EU loans

The European Investment Bank lent billions to carmakers, in part to clean up diesel cars. But diesel cars are still dirty, prompting questions if the money was well spent.

EU redoubles attack on roaming charges

After an embarrassing U-turn last week, the EU commission has proposed to abolish roaming charges by June next year. Only "abusive" clients to pay.

Stakeholders' Highlights

  1. GoogleBringing Education to Refugees in Lebanon With the Clooney Foundation for Justice
  2. HuaweiAn Industry-leading ICT Solution Provider and Building a Better World
  3. World VisionUN Refugees Meeting a Wasted Opportunity to Improve the Lives of Millions of Children
  4. Belgrade Security ForumCan Democracy Survive Global Disorder?
  5. YouthProAktivEntrepreneurship, Proactivity, Innovation - Turn Ideas Into Action #IPS2016
  6. GoogleTrimming the Waste-Line: Weaving Circular Economy Principles Into Our Operations
  7. Crowdsourcing Week EuropeDon't Miss the Mega Conference to Master Crowdsourcing, Crowdfunding and Innovation! 10% Discount Code CSWEU16
  8. Martens CentreFighting Terrorism: Do we have what it takes? 26 September, Brussels
  9. ACCAKaras Report on Access to Finance for SMEs in a Capital Markets Union
  10. Centre Maurits Coppieters"I still believe we can change Europe" Said David Grosclaude
  11. World VisionThe Child Protection Index to be Launched in Brussels on 28 September 2016
  12. HuaweiDigital Transformation: Unleashing Europe’s Potential