France gets two-year delay to meet EU deficit target

Joint press conference by Vice-President Valdis Dombrovskis and Commissioner Pierre Moscovici following the College decision on Economic Semester 2015 on February 25, 2015

France will not be sanctioned for its imbalanced budget. The European Commission proposes to accord two more years to the country to correct its excessive deficit and reach the fixed limit of 3 % deficit of the GDP in its budget. According to the Commission the decision was “difficult”. It is said to be a “political” choice and is criticized by those who plead for a strict application of the rules of the stability pact. France did not get a gift, French Commissioner Pierre Moscovici stated after the announcement.

The deadline for France to reach the 3 percent limit for its public deficit will be 2017. Within the next three months the country will also have to reduce its structural deficit by 0,2 percent to reach the 0,5 percent requested by the Commission.

The Commission published on Thursday, February 26, the country-specific updates for the European semester 2015.

Of the 16 countries the Commission identified in November for macroeconomic imbalances, three have been stepped up in the procedure (France, Germany and Bulgaria), for two the Commission opened a procedure (Portugal and Romania).

No excessive deficit procedure will be triggered for Belgium and Italy. Budgetary efforts of both countries for 2015 were sufficient, Vice-President Valdis Dombrovskis explained during the press conference given after the meeting of the College on Wednesday (February 25).

Complicated French case

“France was the most complicated case”, Dombrovskis added.

According to the Commission, the country is going in the right direction, but more efforts are needed.

France was stepped up in the procedure to the second highest stage 5, meaning that is economy faces “excessive imbalances, which require specific monitoring and decisive policy action.”

French Commissioner Pierre Moscovici called the decision being “realistic, pragmatic, and just”.

“With two years, this is holding up a pressure that cannot be ignored. At the same time this allows France to continue with its politics of growth and job creation, because this Commission is not a Commission that wants to punish, it is a Commission that wants to solicit to growth, to create jobs”, Moscovici stated in an interview after the press conference.

“I think this is a well calibrated measure,” he argued, adding that the Commission clearly incites France to implement reforms. So far the country did take enough efforts not to get sanctioned. (audio in French)

“If governments make efforts, we do not sanction. In this case efforts were sufficient to avoid sanctions. And we have to say it, this is not a gift, it is not a political decision, it is not because France is a bigger country than others. This is not what happened.”, the French Commissioner explained. “Nonetheless, if sanctions are needed, they must and can be implemented. This is not the case this time. But at the same time we say that efforts have to be continued, these two years will be imperative. The implementation of structural reforms is vital if the country wants to improve its competitiveness and we noted that competitiveness recovered slowly while the deficit of the external trade remained massive. Therefore it is necessary to pursue.”

According to EU officials the decision was “difficult”. Explanations on the reasons why France was getting two more years to fulfil the conditions were not easily obtained.

The decision was taken unanimously, after a high quality debate amongst the 27 Commissioners, EU officials repeated several times, underlining that it was known that France would not be able to reach the target this year.

“At a starting point of the discussion, Commissioners had slightly different points of view on some points,” Moscivici admitted while facing journalists after the press conference. He said that he was there “to ensure a good landing”.

The news of the postponed deadline to reach the deficit target might be good news for France, but not necessarily for President Francois Hollande, who in case he will run again, will be in the middle of the presidential campaign in 2017.

France is not Greece

France will also have to find 4 billion euros within the next three months to reduce the deficit by 0,2 percent, Moscovici confirmed.

The Commission is applying double standards here, the German Liberal Alexander Graf Lambsdorff said in an interview with a German radio. He referred to the strictness shown towards Greece during the negotiations on the bail-out program.

But France is not Greece, Pierre Moscovici argued.

“No, France does not have 175 percent of public debt, France is not a country without access to the financial market. On the contrary, France has a broad financial market with low interest rates, like never in the past. We have to stop this pointless comparisons. On one hand we have a country that is in the [bailout] programme, on the other hand we have the second biggest economy in the Eurozone.”

• Author: Danièle Weber, Euranet Plus News Agency

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