Wednesday

8th Dec 2021

Eurogroup puts pressure on France to deliver on deficit

  • Paris could face a fine in March (Photo: Moyan Brenn)

Eurozone finance ministers on Monday (8 December) greenlighted a European Commission proposal to give France three more months to fix its budget deficit, but spelled out how much is needed in "additional measures".

"We had an intensive and fruitful discussion on national draft budgetary plans and the European Commission's opinion on them," Eurogroup chief Jeroen Dijsselbloem said in a press conference after chairing the meeting.

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He said it was a matter of "credibility" for the EU's newly strengthen role in scrutinising national budgets for all countries to stick to the rules.

The EU commission last week singled out France, but also Italy and Belgium, for falling short of what they had pledged to do in order to reduce their budget deficit and debt, respectively. The Juncker commission, only one month in office, decided to give the three countries time until March to adopt extra measures.

The main sinner is France, however,

Even if most other eurozone countries are breaching the deficit and debt rules, France is the only one risking fines at this point, as it has been in "excessive deficit procedure" since 2009 and has missed one deadline after another.

In the long-fought-over conclusions, the Eurogroup spells out the gap between what France should do in 2015 and what it actually plans to do, in terms of structural reforms.

"We note that according to the latest Commission assessment, France's structural fiscal effort in 2015 will be 0.3 percent of GDP, whereas 0.8 percent of GDP is required under the excessive deficit procedure. On that basis, additional measures would be needed to allow for an improvement of the structural effort in order to comply with the rules of the Stability and Growth Pact," the conclusions read.

The gap is 0.5 percent of the gross domestic product, which is about €10 billion worth of structural measures.

EU diplomats also point out that France is the only country invited to take "additional measures" to fill the gap.

For all other countries, including Italy and Belgium, the language used is "effective measures" - meaning that no extra measures are needed, but the effectiveness of the planned ones must still be agreed between the capitals and the EU commission.

EU economics commissioner Pierre Moscovici, a former French finance minister partly responsible for France's reforms lag, said that "all options are on the table", including sanctions, if Paris does not step up to the plate.

He said there are two possibilities for March: either France is found to have taken "effective action" and is given a new deadline and possibly a new target for 2015, or it is non-compliant and obliged to take extra measures under increased scrutiny or face sanctions.

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