EU issues warning to France over 2014 budget

There was some good news for France on Friday when the EU gave Paris the green light for its draft 2014 budget. However Brussels did issue a stern warning to France that there was "no margin" for error in reducing its public deficit.

EU issues warning to France over 2014 budget
Brussels gives green light to France's 2014 budget but warns there is "no margin" for error over reducing its deficit. Photo: Joel Saget/AFP

The EU cleared France's draft 2014 budget on Friday under new eurozone oversight powers, but warned Paris it has "no margin" for error in reducing its public deficit.

The measures contained in the French government's 2014 budget suggest "adequate progress" towards an extended 2015 deadline for meeting the EU's deficit ceiling, "albeit with no margin," the European Commission said.

France has the eurozone's second-biggest economy, but French output fell back and shrank in the third quarter according to the latest growth figures, and made only "limited progress" in 2013 in tackling is budget problems.

The European Commission, in its first judgement on eurozone states' budgets under post-debt crisis powers, approved the draft budgets of all 13 eurozone countries which are not in bailout programmes.

But EU Economy and Euro Commissioner Olli Rehn also warned of increased "risk" that Spain's public deficit and Italy's debt could get worse.

Spain's draft 2014 spending plans are "at risk of non-compliance," the EU executive said, as Spain struggles towards a delayed 2016 target to return within EU norms, while Italy may also miss debt-reduction targets.

On both Spanish and Italian concerns, the Commission "invites the authorities to take the necessary measures within the national budgetary process to ensure that the 2014 budget will be fully compliant."

In a sign of the willingness by the Commission possibly to intervene when it sees risks that a country is heading structurally away from agreed targets for the common good of eurozone countries, Rehn said that Italy had been denied the right to class some spending under a special investment exemption.

There was also a reminder for Germany – under Commission pressure to re-balance its economy to stimulate domestic demand as well as export-led growth – to submit an updated draft budget as soon as a new federal government is agreed under difficult coalition negotiations.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.