15th Aug 2022

French deficit to come under the EU spotlight

France is expecting a fierce debate among EU finance ministers early this week over its backtracking on deficit-cutting promises, with President Nicolas Sarkozy insisting that the bloc should not "leave Europe in the hands of automatic rules" in both monetary policy and other areas.

The French and Italian budgetary plans are on the agenda of a eurozone ministers' meeting on Monday (11 February) and at a full EU finance ministers' session on Tuesday.

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The European Commission has previously urged both countries to cut back on spending, warning that they may breach their promises to balance their books – Paris by 2012 and Rome by 2011.

Most other EU countries are aiming to achieve this goal by 2010, with Paris's apparent reneging on its promise set to cause irritation at the meeting.

Brussels has called for more stringent fiscal policy, particularly in France, as one of the biggest European economies and currently with one of the highest rates of public expenditure in the EU.

Dutch finance minister Wouter Bos said last week the French "have total disregard for European rules," adding "These rules apply to the small countries just as they do to the big countries, including France," the AFP news agency reported.

"France cannot unilaterally change the timetable," said Luxembourg leader and eurogroup chief Jean Claude Juncker in an interview with French business newspaper Les Echos.

But diplomats expect Paris will nonetheless try to avoid any reference to the 2010 medium-term objective in the conclusions of the ministerial meeting and defend its budgetary policy by referring to a likely drop of tax revenues due to slowing economic growth.

France against EU taboos

In a similar call for a flexible approach to EU rules, Mr Sarkozy argued over the weekend that national politicians should have a say over monetary policy, currently exclusively in the hands of the independent European Central Bank.

"Right now, what is at stake is to put politics back in Europe, to not leave Europe in the hands of automatic rules that allow no room for decisions and political responsibility," the French president aid in a televised address following the country's adoption of the new EU treaty.

"We must be able to talk about everything just like in any democracy: of our currency which is not a taboo subject, of trade policy, of industrial policy, of reciprocity in competition matters or the excesses of financial capitalism," he added.

The comment marks yet another attempt by Mr Sarkozy to boost political influence over the 15-strong monetary union's central bank, due his dissatisfaction over its interest rate policy.

France has let it be known that it thinks the strong euro is damaging for its exporters and higher interest rates bad for its economic growth.

So far however, Paris has been alone in calls for more political debate over monetary policy, with other national capitals – particularly Berlin – strongly rejecting the idea.

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