Saturday

7th Dec 2019

EU still undecided on France deficit

  • Paris is a credibility test for EU's beefed up economic scrutiny (Photo: Trey Ratcliff)

Fiscal hawks and doves within the EU commission and member states continue to disagree on how to deal with France's budget deficit, seen as a credibility test for the EU.

A meeting of heads of cabinets of EU commissioners over the weekend ended without a clear decision on possible sanctions for Paris for having again missed the three-percent deficit target for next year.

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France has a projected deficit of 4.3 percent of GDP in 2015 and has announced it will meet the deficit target only in 2017.

Handelsblatt reports that a eurozone finance ministers meeting scheduled for next Monday (1 December) to discuss the EU commission's verdicts on the nationals budgets is likely to be postponed.

The EU executive has until Sunday (30 November) to publish its opinions on the 18 eurozone countries' budgets.

French media have also reported that a delay is likely. Le Figaro quoted officials as saying that a decision on France's sanctions could be postponed until March next year, to give the French government more time to put in place some of the announced cuts.

EU commissioners are likely to discuss the issue on Tuesday in Strasbourg.

French finance minister Michel Sapin meanwhile has been touring southern states seeking support for his cause. He visited Madrid and Lisbon at the end of last week, pointing out that Spain was also granted two delays on its deficit targets.

However, Spain and Portugal's spending cuts were much harsher than what France has pledged to do - a salary freeze and more flexible working hours.

And to some - notably German - voices, France's credibility is shaky.

Last week German commissioner Guenther Oettinger said the commission should be tough on "deficit recidivist" France, as a matter of EU credibility and that Paris should table "clear, concrete" reforms.

On Sunday, German finance minister Wolfgang Schaeuble entered the fray, telling Focus magazine that the EU economics commissioner (currently a post held by a Frenchman, Pierre Moscovici) should have a veto right over national budgets.

He said the economics commissioner should have the same powers as the anti-trust commissioner, who can fine states or companies for violating EU competition rules "without any political compromises".

"The parliaments of the respective member states would still decide themselves if they cut spending, increase taxes or adopt growth-enhancing measures," Schaeuble said.

But a veto would "give a strong signal that we jointly really want to stick to our commitments. We need to show how much further we want to go in the direction of a fiscal union. This means, that eurozone countries make binding commitments to decrease their debt," he added.

Debt is the main problem for another big member state, Italy, whose budget deficit is closer to the three-percent target.

The EU commission is expected to clear the Italian budget, but re-examine it in March, Italian media reported on Sunday.

France gets three months to tweak budget

The EU commission on Friday said "political" factors merit giving France more time to work on its budget deficit. It urged Germany to spend more to revive eurozone growth.

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