Saturday

24th Aug 2019

'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

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join 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. Ocean Viking to disembark in Malta after ordeal
  2. Germany joins France in world outcry on Brazil fires
  3. British people lose faith in Brexit deal
  4. Brexit hardliners want further changes to EU deal
  5. German manufacturers confirm fear of recession
  6. Belgian socialists and liberals scrap over EU post
  7. Fall in EU migration leading to UK skills shortages
  8. Switzerland makes post-Brexit flight preparations

Opinion

Why von der Leyen must put rights at core of business

Ursula von der Leyen's in-tray must include those European executives on trial for systematic workplace harassment, the break-up of European slavery rings, and allegations of European companies' abuse in palm oil, including child labour, land grabs, and deforestation.

Stakeholders' Highlights

  1. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  2. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  3. Nordic Council of MinistersNo evidence that social media are harmful to young people
  4. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  5. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  6. Nordic Council of MinistersEducation gets refugees into work
  7. Counter BalanceSign the petition to help reform the EU’s Bank
  8. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  9. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  10. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  11. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  12. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North

Latest News

  1. Spain heading for yet another general election
  2. EU to discuss Brazil beef ban over Amazon fires
  3. 'Our house is burning,' Macron says on Amazon fires
  4. What happens when trafficking survivors get home
  5. EU states and Russia clash on truth of WW2 pact
  6. EU considers new rules on facial recognition
  7. EU to pledge Africa security funds at G7 summit
  8. Letter from the EESC on per diem article

Join EUobserver

Support quality EU news

Join us