At a hearing before the finance and European affairs committees of the French National Assembly on Wednesday 4 October, the Commissioner for Economic and Financial Affairs, Pierre Moscovici, reiterated the structural effort to be made once a state enters the preventative plank of the Stability and Growth Pact.
First of all, Moscovici welcomed the fact that the French public deficit will fall back below the 3% of GDP mark by the end of this year (see EUROPE 11871), describing this as a strong signal and a mark of credibility to France's European partners. He said that he had high hopes that the last two Eurozone countries still under excessive deficit proceedings, France and Spain, will exit the proceedings in spring of next year and join the preventative plank of the pact.
However, the Commissioner took pains to stress that once the public deficit in nominal terms is back below 3% of GDP, the correction of the structural deficit (not including cyclical effects) must be sustainable. Under the revised rules of the Stability Pact, the pace for the reduction of structural deficit must stand at 0.6% of GDP per year.
However, the French public finance bill for 2018 anticipates a structural effort of 0.1% of GDP.
Stressing that he was not acting as a “gamekeeper”, the Commissioner acknowledged that the rules were flexible and allowed France a maximum deviation over two consecutive years of 0.1% of structural efforts. He said that the budgetary forecasts for next year were therefore acceptable, but used up all of the discrepancy margin laid down by these rules. He concluded by stating that the French government is on the right track in terms of political choices over public expenditure and revenue. (Original version in French by Lucas Tripoteau)