The European Commission is expected to find that the macro-economic deficits observed in France are no longer excessive. This decision will be announced to coincide with the publication, on Wednesday 7 March, of the country-by-country reports in the context of the European Semester budgetary process for 2018.
More specifically, this procedure will mean a slightly lower level of supervision for the French economy by the institution, along the lines of that currently in place for Germany.
Readers may recall that the macro-economic imbalance procedure was set in place in 2011, when the financial crisis had shown that imbalances in one EU member state could affect the others.
This procedure provides for four types of assessment for a state: - no imbalance, imbalances observed, excessive imbalances and excessive imbalances with corrective actions required. Only the last of these categories can require a member state to adopt the recommended measures, but none of them have to date been placed under this procedure.
In February 2017, the Commission placed six member states under the excessive imbalance procedure (Bulgaria, Cyprus, Croatia, France, Italy and Portugal) (see EUROPE 11731).
In order to justify a lower level of supervision of the macro-economic imbalances inherent to the French economy, the Commission has taken account of a number of indices. Firstly, it observed that the French nominal public deficit would drop below the 3% of GDP mark this year, allowing France to come out of the excessive deficit procedure (see EUROPE 11885).
The European institution takes the view that the competitiveness of the French economy has improved, due in large part to the employment law reforms undertaken by the governments of Manuel Valls and Édouard Philippe, and improvements to the trade balance. “Thanks to past and current reforms, the French economy is doing better! The European Commission has today acknowledged this progressive improvement. The budgetary deficit and employment rate are falling. The increase in the debt and loss of competitiveness have been halted”, acknowledged Pierre Moscovici, the Commissioner for Economic and Financial Affairs.
Several other member states may, moreover, soon be following France. Italy, however, is not expected to come out of the category of countries presenting excessive macro-economic imbalances.
Taking account of "aggressive" tax practices. It is worth noting that for the first time in its reports, the Commission has laid emphasis on the “aggressive tax planning” practices of seven countries, as Moscovici acknowledged. The states in question are Belgium, Cyprus, Hungary, Ireland, Luxembourg, Malta and the Netherlands. “These practices undermine fairness and the level playing field in our internal market, and they increase the burden on EU taxpayers”, the Commissioner added. (Original version in French by Lucas Tripoteau)