Brussels, 06/10/2014 (Agence Europe) - If it wishes to avoid a negative opinion for its draft budget for 2015, France has no choice but to announce further cuts and additional reforms.
"France will not get through without announcing further reforms," said a senior European Commission official on Monday 6 October. He explained that the draft budget for next year, as presented by the French government last week, allows the guardians of the European budgetary rules, the Commission and the Council of the EU, to make the case for rejecting it.
In order to prevent the Commission from officially calling upon France - something that has never happened since the revision of the Stability and Growth Pact ('2 pack' and '6 pack') - to change its 2015 draft budget, negotiations have taken place at the highest political level to urge the French authorities to announce further measures. The outgoing president, José-Manuel Barroso, and his incoming replacement, Jean-Claude Juncker, do not wish to end or start their terms in office with a decision of this kind, which would go sorely against the grain, according to the same source. In order to convert an unfavourable preliminary opinion into just an "ultra-critical comment", Paris would have to win over its partners on a number of points: - the achievement of a structural budgetary effort (corrected for economic conditions) of at least 0.5%, whilst the draft French budget for 2015 involves a structural effort well below this level, at around 0.2%, even though the specific recommendation for France called for an effort of 0.8%; - the nominal public deficit would have to continue on a downward trend and not exceed the level of 4.3% of GDP it reached in 2013; - subsequent structural reforms would have to be announced in order to create the conditions for activity to resume.
France presented a draft budget for 2015 which predicts stagnation in the public deficit in 2014 at 4.3%, followed by a slight increase to 4.4%, with the return below the 3% mark set unilaterally for 2017 rather than 2015, a date which would comply with the commitments taken at European level (EUROPE 11167).
In order to convince its partners of its intentions for action, the French authorities will stress the current economic situation, which is marked by flat-rate growth (0.4% of GDP in France in 2014) and very low levels of inflation (0.3% in September, according to Eurostat). On the other hand, invoking the 'exceptional circumstances' clause laid down by the Stability and Growth Pact, which would give France additional flexibility in the time taken to bring its deficit down, will "never work", in the view of the same source. (MB)