Luxembourg, 03/06/2003 (Agence Europe) - It came as no great surprise that the Member States' Finance and Economy Ministers adopted by qualified majority a recommendation on the excessive deficit procedure opened against France, very similar to that of the European Commission (see yesterday's Europe, and of 29 May, p.12) in Luxembourg on Tuesday, given the Eurogroup-level agreement of the evening before. Only the Netherlands and Denmark voted against this text, on the grounds that both feel France should be forced to reduce its structural deficit by 0.5% of GDP this year (Spain was on the same lines as the Dutch, but finally rallied to the opinion of the majority of the Council). French Economy and Finance Minister, Francis Mer, who has always asked for realistic objectives in 2003, in view of the difficult economic situation, benefited from the understanding of most of his EU counterparts.
In conformity with the Eurogroup agreement, the Ecofin Council called upon France to make "significantly greater" efforts in 2003 than currently planned, to reduce its structural deficit (the Commission's suggestion for 2003 was an improvement of this deficit "to a greater extent" than currently planned). The hardest part will be reserved for 2004, when the Ecofin Council will ask Paris to implement measures to reduce its structural deficit by 0.5% of GDP, or more if necessary. The efforts made in 2003 and 2004 should be enough to allow France to bring its nominal state deficit under the 3% of GDP mark next year at the latest. Council has given France until 3 October to announce measures by which to remedy its excessive deficit situation in 2004. For the time being, France has cancelled 1.4 billion EUR of the 4 billion EUR of credits which have been frozen, corresponding to a reduction in expenditure of 0.1% of GDP. France has also been advised to "limit the increase" of its public debt as of this year.
The vast majority of Ministers felt "France has the right and the responsibility to spread its budgetary effort over this year and next, ending up with a deficit under 3% of GDP in 2004", explained Council President Nikos Christodoulakis on Monday evening, after the Eurogroup meeting. "Eurogroup had placed a certain emphasis on the efforts to be made by France as of this year", said Mr Christodoulakis, by way of comparison with the Commission's proposal, "the spirit of which has largely been kept". "The Commission's proposal was vaguer on the scope of this improvement" in 2003, concluded the Greek Finance Minister.
Netherlands decry favourable treatment accorded to France
The Netherlands adopted a statement to be included in the minutes of the Council, in which they reiterate the considerable efforts Portugal (reduction by 1.5% of GDP in one year by corrective measures) and Germany (reduction by 1% of GDP in 2003) agreed to, to reverse the upward trend of public expenditure. In justification of their refusal of the Council text, the Netherlands state that they cannot accept France being treated differently (than other Member States which have been or which are in an excessive deficit situation).
German Secretary of State for Finance, Caio Koch-Weser, on the other hand, welcomed the identical treatment accorded to his country and to France in 2004, as the objective is to bring deficits below 3% of GDP. He acknowledged that the decision to be taken on France's case was a hard one; and that it had been the subject of "long discussions" within the Eurogroup.
Mr Mer says Council has acknowledged France must find its own way for 2003
Reacting implicitly to the Dutch criticism, Mr Mer told the Press on Tuesday that "certain people have adopted a point of view which is maybe too consistent with previous discussions on the subject, forgetting that, in the mean-time, the economic situation has worsened". The fact remains, he continued, that "everybody has recognised that we are making efforts (freeze, postponements, credit cancellation and budget guidelines), and that our objective is that next year, and using steps we must decide upon, we must manage to respect the spirit of the stability and growth pact, going below 3% in economic conditions we have to imagine today for next year, and which will certainly be better than those we are experiencing today". Mr Mer added that the Ministers had agreed to concede that "it is up to us to find our own way" and that as a result, they "had no particular reason to dictate the 2003 part, which would have been difficult to achieve is they had asked us to fall considerably below 3.4% of GDP", notably because economically speaking, "a good part of the game is behind us".