Thursday

23rd Feb 2017

'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.

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. WTO says Russian pork ban was illegal
  2. Belgian nuclear plant made 'significant progress' on safety
  3. Report: Commission gauging EU support for Poland sanctions
  4. Irish PM expected to quit amid police scandal
  5. After Brexit vote, 100,000 UK firms registered in Ireland
  6. Bayrou to support Macron in French presidential election
  7. British by-election tests Ukip strength after Brexit
  8. Romanian parliament buries controversial corruption decree

Stakeholders' Highlights

  1. QS World MBA TourMeet with Leading International Business Schools in Paris on March 4th
  2. Malta EU 2017Economic Governance: Agreement Reached on Structural Reform Support Programme for Member States
  3. Socialists & DemocratsWomen Have to Work Ten Years Longer to Match Lifetime Earnings of Men
  4. Counter BalanceTrans-Adriatic Pipeline Is a Major Risk for Banks, Warns New Analysis
  5. Martens CentreEU and US Migration Policies Compared: Join the Debate on February 28th
  6. Swedish EnterprisesTechnology and Data Flows - Shaping the Society of Tomorrow
  7. UNICEFNearly 1.4 Million Children at Risk of Death as Famine Looms Across Africa and Yemen
  8. Malta EU 2017End of Roaming Fees: Council Reaches Agreement on Wholesale Caps
  9. Nordic Council of MinistersNordic Innovation House Opens in New York to Help Startups Access US Market
  10. Centre Maurits CoppietersMinorities and Migrations
  11. Salzburg Global SeminarThe Child in the City: Health, Parks and Play
  12. UNICEFNumber of Ukrainian Children Needing Aid Nearly Doubles to 1 Million Over the Past Year