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DEFICIT

France and EU at odds over economic targets

France and Europe were once again at odds on Monday over whether Paris will really achieve its EU target to cut its deficit as well as its predictions over the growth of its economy and a fall in unemployment.

France and EU at odds over economic targets
Will France really stick to its deficit target set by the EU? The EU does not think its possible. Photo: Luc Legay/Flickr

France on Monday rejected an EU forecast that it will fail to cut its overall budget deficit as promised next year, with Finance Minister Michel Sapin saying Paris was "determined" to stay on target.

"The government reaffirms its determination to put in place the Responsibility and Solidarity Pact and to make the €50 billion ($69 billion) in necessary savings to bring the deficit to three percent of GDP (ouput) next year," Sapin said in a statement.

The European Commission has repeatedly criticised France, with the eurozone's second-biggest economy, for its excessive deficit, warning that it risks destabilising the bloc's nascent recovery from the debt crisis.

In economic forecasts released on Monday, the Commission said it expected France to overshoot its target with a deficit of 3.4 percent in 2015. 

The EU Commission also does not believe France can reduce its soaring unemployment rate in 2014, instead penciling in a decrease for 2015, albeit a slight one from 11.8 percent to 11.4 percent.

Sapin said the EU had "only partially taken into account" the amount of French savings in its prediction.

This is just the latest clash between Europe and France over predictions about whether it can get its beleagured economy back in order.

Just days after Sapin was named finance minister he was forced to dismiss earlier indications that Paris was angling for a delay.

"I have always said that I have not asked for a delay," Michel Sapin told AFP in a telephone interview, as the government spokesman said that deficit control was a condition for growth.

Sapin's remarks stand in contrast to signals from President Francois Hollande that Paris would seek leeway over a deadline for cutting its excessive public deficit as it seeks to bring pro-business reforms to boost growth.

The French daily Le Figaro also reported that two of France's senior politicians, Philippe Leglise-Cost and Emmanuel Macron, received a frosty reception from their eurozone partners in Brussels during a recent trip to ask for more leeway. 

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EUROPEAN UNION

France leaves EU deficit sin bin after nearly ten years

The EU officially recommended that France be removed from Brussels' public spending penalty box, handing a victory to French President Emmanuel Macron in his push to gain the trust of austerity-pushing Germany.

France leaves EU deficit sin bin after nearly ten years
Photo: AFP
The European Commission, the EU's executive arm, formally proposed to take France out of the so-called excessive deficit procedure that was first opened in 2009 at the start of the eurozone debt crisis.
 
“It is an important moment for France after nine years of a long, painful procedure and sometimes painful but necessary budgetary efforts,” said EU Economic Affairs Commissioner Pierre Moscovici at a news briefing.
 
The European Commission forecasts that France will hit a deficit of 2.6 percent of GDP in 2017, below the EU's three percent limit.
 
This would be followed by 2.3 percent in 2018, then 2.8 percent in 2019, the European Commission estimated in its latest economic forecasts. 
 
Macron saw lowering the deficit as key to earning credibility with European leaders, especially German Chancellor Angela Merkel, as he pushes ambitious reforms to the eurozone.
 
France was one of the last two countries in the eurozone, along with Spain, still under the threat of the excessive deficit procedure, which can lead to sanctions and fines.

 
But eyes are now turning to Italy, whose populist and eurosceptic government has promised to flout EU budget rules, which also include a 60 percent of gross domestic product (GDP) cap on public debt.
   
The commission's proposal on France will have to be formally endorsed by EU finance ministers at a meeting in July.

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