Monday

30th May 2016

France scraps deficit target, as eurozone recovery halts

  • Hollande (r) has admitted defeat in his bid to cut its EU budget deficit targets on time (Photo: consilium.europa.eu)

France has all but abandoned a target to shrink its deficit, as the eurozone endured a turbulent day that raised the prospect of a triple-dip recession.

Figures published by Eurostat on Thursday (14 August) indicated that the eurozone economy flatlined between April and June, while the EU-28 saw 0.2 percent growth.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

Latvia was the currency bloc’s strongest performer with 1 percent growth, and there was positive data from former crisis countries Spain and Portugal, which both expanded by 0.6 percent.

But if there was positive news from the eurozone’s southern and eastern members, there was little to cheer from its three largest economies - Germany, France, and Italy - which account for around two thirds of the eurozone’s output.

Germany's output fell by 0.2 percent, the same as Italy, which announced its second quarter figures last week. France recorded zero growth for the second successive quarter, while finance minister Michel Sapin suggested that the country’s deficit would exceed 4 percent this year, missing its European Commission-sanctioned 3.8 percent target.

In an article in Le Monde on Thursday (14 August), Sapin abandoned the target, commenting that “It is better to admit what is than to hope for what won't be."

France would cut its deficit "at an appropriate pace," he added in a radio interview with Europe 1.

Pointing to the contraction of the German economy, Sapin remarked that "the EU's big engine, Germany, is today negative. There is therefore a French problem and a European problem".

Sapin’s admission is another setback for beleaguered President Francois Hollande, who made hitting the 3 percent deficit target spelt out in the EU’s stability and growth pact by 2013 one of his key election pledges in 2012.

Paris has now revised down its growth forecast from 1 percent to 0.5 percent over the whole of 2014, and cut its projection for 2015 to 1 percent from 1.7 percent.

France has already been given a two year extension to bring its deficit down to within the 3 percent limit by 2015, a target which now appears almost impossible to attain.

Sapin’s remarks are almost certain to inflame his opposite number in Berlin, Wolfgang Schaueble, as well as EU officials who complain that Hollande’s government has failed to put in place structural reforms to make the French labour market more flexible and to cut welfare spending.

Meanwhile, Thursday’s figures only cover economic activity before the tit-for-tat sanctions battle between Europe and Russia began in earnest, raising fears the bloc could be headed towards a triple-dip recession.

German investor sentiment has fallen to its lowest level in 20 months, with analysts suggesting that EU-Russia sanctions, which now include import bans on food by Brussels and Moscow, will hurt its export-based economy.

Outside the eurozone, the EU-28 recorded modest overall growth of 0.2 percent. The UK and Hungary were the strongest performers outside the eurozone, both growing by 0.8 percent.

In a statement, the EU commission said that the figures presented "a mixed picture" claiming that the countries which had pursued bold economic reforms had enjoyed the strongest growth.

Does Italy need €14bn of EU budget waivers?

The EU Commission has agreed to relax Italy’s deficit targets. That could help Renzi ahead of this week's local elections and in a later referendum on constitutional reforms.

News in Brief

  1. Juncker to seek renewed backing for TTIP talks
  2. EP president rules out return to German politics
  3. Austrian far-right wants to probe election fraud accusations
  4. Irish PM warns Brexit could bring back border controls
  5. Truckmakers risk record cartel fine
  6. London mayor teams up with British PM on Brexit
  7. Syrian refugees sue Denmark over immigration law
  8. Ukraine bans Gorbachev for backing Crimea's seizure

Stakeholders' Highlights

  1. ACCAEducation and Training 2020 - Giving Young People the Workplace Skills They Need
  2. EPSUTrade Unions Back New Undeclared Work Platform
  3. European Healthy Lifestyle AllianceCould targeting children’s fitness boost academic performance?
  4. World VisionDeclares the World Humanitarian Summit a Positive Step in a Longer Journey to Ending Need
  5. EJCPresident Dr. Moshe Kantor on Brexit and the Jewish Question
  6. Swedish EnterprisesNew rules for posted workers - Better Protection or the End of Posting ?
  7. World VisionWhy The EU Needs to Put Children at the Centre of Emergencies - In Their Words
  8. ACCASustainability Reporting in Danger of Losing Its Momentum Says ACCA and CDSB
  9. Dialogue PlatformDiversity as Heritage of Humanity! Join the “Colors of the World“ Show at the EP
  10. Centre Maurits CoppietersNew Responses to the Basque Peace Process? MEP Juaristi on Stateless Challenges Conference
  11. European Healthy Lifestyle AllianceImproving Cardiovascular Health Begins by Closing the Gap in Sex Disparities
  12. IPHRBrussels Talks to Take Stock of Human Rights in Turkmenistan

Latest News

  1. Juncker agrees to visit Russia in June
  2. Pro-Brexit Tories predict Cameron leadership challenge
  3. Merkel and Hollande pledge unity at Verdun ceremony
  4. Russia mocks ex-Nato chief's new Kiev job
  5. Poland, migration and environment on the agenda THIS WEEK
  6. Does Italy need €14bn of EU budget waivers?
  7. More than 700 migrants feared dead in Mediterranean
  8. EU to scrutinise environmental action