Wednesday

16th Oct 2019

Brussels to let Paris and Berlin off euro rule hook

The European Commission will tomorrow (14 December) suspend its disciplinary procedure against France and Germany because it believes they have taken sufficient measures to reduce their budget deficit, EU sources have confirmed.

Economics and monetary affairs Commissioner Joaquin Almunia will tomorrow present a Commission report into the deficit situations of France and Germany and sources have confirmed that Brussels is satisfied that they will get their deficits below the maximum permitted limit of three percent in 2005.

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"There seems to be a real willingness to comply", said one source. "No further steps are necessary ... this is not a political decision and the Commission will continue to monitor the situation".

Paris and Berlin have repeatedly breached the EU's Stability and Growth Pact - the rules that underpin the euro - but both have announced concrete measures to improve the situation, satisfying the Commission that no further action against them is required.

France has been able to reduce its deficit mainly through higher growth levels, whereas Germany has been forced to take several additional measures. A plan to scrap a national holiday to reduce the deficit was hastily shelved.

Long saga

Tomorrow's announcement brings to an end a long and bitter power struggle between the European Commission and the euro zone's two biggest economies.

Last November, in an acrimonious meeting that went on until 4.30 in the morning, France and Germany persuaded fellow finance ministers to suspend the disciplinary procedure against them, prompting a furious Commission to take them to the European Court of Justice.

The Court ruled that the finance ministers' decision be annulled, forcing France and Germany to take action to avoid fines of potentially billions of euro.

However, the atmosphere has since changed considerably and a reform of the rules is underway, which will give member states more flexibility.

Glossary of key euro pact terms

The language surrounding the EU's Stability and Growth Pact can be highly complex for the uninitiated. Click here for an explanation of the key terms.

Fury and recrimination over euro rules

As more details emerged about the deal struck to save France and Germany from potential European Commission fines, ministers, commissioners, MEPs and spokespeople swiped at each other both in public and behind the scenes.

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