Brussels, 10/03/2015 (Agence Europe) - On Tuesday 10 March, the European finance ministers gave France a grace period of two years (from 2015 to 2017) to bring its public deficit below the 3% of GDP mark.
The European Commission's recommendation, which was adopted by the Ecofin Council, calls on Paris to bring its public deficit down to 4% of GDP in 2015, 3.4% in 2016 and 2.8% in 2017, and to produce a structural budgetary effort (not including conjunctural effects) equivalent to 0.5% of GDP in 2015, 0.8% in 2016 and 0.9% in 2017. In order to achieve these objectives, the Council is insisting upon additional measures equivalent to 0.2% of GDP in 2015, 1.2% in 2016 and 1.3% in 2017. On the basis of announcements France will make in April, the Council will return to this dossier in May and certainly by no later than 10 June.
“France now needs to step up its efforts in terms of budget and reforms”, said the Commissioner for the Euro, Valdis Dombrovskis, stressing the “tight deadlines” the French authorities must comply with. This will be achieved by presenting further savings of €4 billion and a substantial raft of reforms by April. The day before, the Commissioner for Economic and Financial Affairs, Pierre Moscovici, described the new trajectory required to consolidate the French public finances as “challenging”. He went on to stress the importance for the Commission of guaranteeing the “credibility” of the Stability and Growth Pact by making sure that France sticks to its commitments.
On Tuesday, the French finance minister, Michel Sapin, welcomed the fact that the trajectory laid down by France “converges” with the one laid down by the EU. On Monday evening, he confirmed that when presenting its stability and reforms programmes in April, France would announce “additional measures” in the order of €4 billion euros “to achieve the quantum of 21 billion euros” of savings scheduled for 2015. He refuted the fact that the Commission had asked France for additional savings of €30 billion over the period 2016-2017, as the European institution's reasoning is based on an extrapolation of the current situation, and does not at this stage take account of the savings of €15 and €14 billion for 2016 and 2017 respectively, which Paris has yet to confirm.
Irritation. Although the decision regarding the French budgetary situation was ultimately a consensual one, the debate pointed to the existence of a certain amount of irritation among certain member states. Some of them, such as Portugal and Ireland, expressed concern at the risk that different rules are applied depending on whether it is one of the 'small' or 'large' countries in the hot seat. The Netherlands said that a problem of the credibility of the rules could arise if the additional measures France has been asked for do not materialise. According to Germany, the Commission has stretched the flexibility in the application of the Pact to breaking point, hence the importance of France not just making announcements, but also adopting credible measures. And the ECB said that there is no convincing argument in favour of giving France more than a year. “Certain member states expressed reservations. The general feeling is to trust the new Commission, whose analysis is just as sharp as in the past”, said the Latvian finance minister who stressed the importance of ensuring “equality of treatment” under the European budgetary rules.
On Monday, the Eurogroup reviewed the budgetary situation of the seven countries of the eurozone at the greatest risk of infringing the Pact in 2015. All of these countries reiterated their commitment to taking the measures needed to comply with the European rules. For Belgium, Malta and Italy and, to a lesser extent, Spain and Portugal, the situation appears “a little more positive than three months ago”, the president of the Eurogroup, Jeroen Dijsselbloem, noted. Even so, “extra efforts” will be required on the part of France and Austria, he added.
On Tuesday, Dombrovskis said that for Belgium and Italy, the Commission did not require the opening of proceedings related to the debt reduction criterion, in view of “relevant factors” such as “low growth, low inflation and structural reforms underway”. (Mathieu Bion)