Tuesday

21st May 2019

EU ends long-running budget battle with France and Germany

The European Commission on Tuesday (14 December) said that "no further steps" are necessary against France and Germany for breaking the economic rules underpinning the euro.

Economics and monetary affairs commissioner Joaquin Almunia told reporters, "given the actions taken by France and Germany, it would appear that no further steps are required at this point".

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France and Germany have for three years been in breach of the EU's "stability and growth pact", which forbids Member States to run a budget deficit above three percent of gross domestic product (GDP).

But Brussels is satisfied that both countries have made sufficient efforts to reduce their deficits to below the three percent level next year. The Commission believes that the German deficit will be 2.9 percent next year and exactly three percent in France.

However, Mr Almunia warned that both countries had taken "one-off" measures, rather than ongoing structural actions and said, "the budgetary situation remains vulnerable in the two countries". He added, "the Commission remains vigilant".

Despite this, the Commissioner confirmed that Paris and Berlin were "on track" to meet the EU's budgetary requirements.

Long and bitter struggle

The 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.

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