Skip to content. | Skip to navigation

Personal tools
Sections
You are here: Home europe France Brussels presses France for flouting budget rules

Brussels presses France for flouting budget rules

15 August 2006, 22:34 CET


The European Commission launched the next stage of EU disciplinary action against France Wednesday, confirming that Paris has taken "no effective action" to cut its public deficit in line with EU rules.

The European Union's executive arm confirmed that France missed a deadline last Friday to announce measures to get its deficit below a euro-zone ceiling of 3.0 percent of gross domestic product (GDP).

The second-biggest economy in the 12-nation zone now faces the next step in a disciplinary warning process that could ultimately lead to multi-billion-euro fines, which would be an unprecedented development in the euro project.

The Commission will decide on October 21 what further action it will recommend against France, with EU finance ministers set to decide on the recommendations on November 4.

"The European Commission today recommended to the Council (of ministers) to decide that France has taken no effective action... within the period laid down," Brussels said in a statement.

EU finance ministers in June gave France three months to come up with concrete proposals to comply with public finance rules laid down in the euro zone's Stability and Growth Pact.

The Commission welcomed steps taken by France to redress its deficit, which is projected to stand next year at 3.6 percent of GDP, against a forecast 4.0 percent for this year.

The French government has announced several measures including the cancellation of state credits worth 1.4 billion euros (1.65 billion dollars), increases in tobacco taxes and reforms to the costly pension system.

"However, these measures do not significantly reduce the 2003 cyclically adjusted general government deficit below the level planned in June as required by the Council," the Commission said.

France has been defiant in its long-running stand-off with Brussels, angering smaller EU member states by insisting that it must put economic growth rather than belt-tightening at the top of its priorities.

But at a meeting of EU finance ministers in Luxembourg this week, France appeared to have won a sympathetic hearing from its partners in the 15-nation bloc.

EU Economic and Monetary Affairs Commissioner Pedro Solbes backed off from a hardline stance against France by saying the economic situation had deteriorated since the EU ultimatum in June.

"In our recommendations in June we asked France to do certain things, but it's true that the economic perspectives for 2003 and 2004 are rather different from what they were in June," he said.

France has also won support from Germany, the euro zone's biggest economy, which is itself having trouble meeting the deficit target and whose stance will be pivotal at the November 4 meeting.

"There can't be (fiscal) consolidation without durable growth and vice versa," German Finance Minister Hans Eichel said after talks with his French counterpart Francis Mer.

Belgian Finance Minister Didier Reynders said Wednesday that France should at the very least cut its public deficit to below 3.6 percent of GDP.

"Anything below 3.6 percent would be excellent," the Belgian minister said, when asked what Paris would have to do to avoid being condemned by other EU states for breaching the stability pact rules.

"For 2004, we have asked for further discussion with the Commission, because it is perhaps possible to go a little lower," he told a small group of journalists.


Web link European Commission press release

Document Actions