Brussels, 30/01/2007 (Agence Europe) - As expected, finance ministers followed the recommendation of the Commission calling for the closure of the excessive debt procedure against France begun in 2003 (see EUROPE 9317). This decision (while awaiting the one on Germany) brings to an end a long and chaotic procedure that has been marked by legal wrangling between the Commission and the Council over the rules of the Treaty (see EUROPE 8747) which led to the reform of the Stability and Growth Pact (SGP). On the basis on Article 104§12 of the Treaty, on Tuesday, the Council decided to repeal the 2003 decision on the existence of an excessive debt in France, which reached 3.2% in 2002 and then threatened to rise to 4.2% in 2003. “Germany, as you might well imagine, is full of hope for its six-month presidency,” said German Finance Minister Peer Steinbrück, showing his impatience to see the closure of the procedure against his country. He and Commissioner for Economic and Monetary Affairs Joaquin Almunia acknowledged the French efforts. Mr Almunia said it was “a good example for the other member states” which were in the process of correcting their excessive debt.
Taking 2005 as the reference year for bringing deficit below 3% of GDP, the Council and Commission were able, therefore, to point to the success of the measures taken between the end of 2003 and 2005, the period when the procedure was left to the side to avoid an embarrassing formal notice (Article 104§9) to France. “The Council felt that France's deficit, which reached 2.9% of GDP in 2005, compared with 4.2% in 2003, has been reduced in a credible and sustainable manner,” the ministers said. The Commission was unable to carry out such an analysis before the autumn economic forecast (see EUROPE 9300) in which it recommended continued consolidation of the French budget, with a deficit of 2.7% for 2006, 2.6% for 2007 and 2.2% for 2008.
“The Council notes, however, that France's public debt was 65.4% of GDP in the second quarter of 2006, which is higher than the 60% reference value set by the EU, and that it is expected to be 63% in 2008,” ministers added. According to France's stability programme, endorsed by the Commission last week, Paris should be able to return to a balanced budget (+0.2% of GDP) and bring debt down to 58% in 2010 (see EUROPE 9350). (ab)