Brussels, 18/02/2015 (Agence Europe) - The European Commission is getting ready to give France extra time to bring its public deficit below 3% mark, in exchange for a renewed and extended commitment to budgetary consolidation and reforms.
The question which remains to be settled before Friday 27 February concerns the length of this grace period. According to the Commission's winter economic forecasts, the French deficit stood at 4.3% of GDP in 2014 and is expected to drop slightly, to 4.1%, in 2015 (see EUROPE 11247). Officially, however, Paris is still supposed to bring its deficit below 3% of GDP in 2015, although nobody still believes that this is possible. “In all evidence, the deadline will not be met”, Pierre Moscovici admitted as long ago as November 2014 (see EUROPE 11207). An extra two years at least seems unavoidable, as the French authorities have been recommending since last autumn. Over at the Commission, the view is that it will be a tough call to come in line with the deficit criteria much before 2017; hence the greater openness to the idea of giving France up to 3 years - or 2018 - on condition that the reform trajectory is maintained or even stepped up.
On Monday 16 February, the French finance minister, Michel Sapin, wrote to the Commission to reiterate his country's commitment to complying with the required structural effort of 0.5% of GDP in 2015, AFP reports. In early February, Moscovici noted that there was a “gap” between the structural effort called for and the effort announced (0.3%). This is why it is so important for France to force through the “Macron” law on the liberalisation of the economy as a guarantee of France's determination to undertake reforms.
The commitment of the French government to reform the economy should be extended beyond “Macron”. In his letter, Sapin pledges to put the finishing touches, over the next weeks, to his diagnosis on the likely deficit for 2015, once the impact of the low inflation and drop in oil prices on the public coffers has been taken into account, “to draw consequences regarding any additional measures we should be thinking about”. The reforms under consideration include employment market legislation (our translation throughout). (Mathieu Bion)