France sends warning to EU over budget reforms

French PM Manuel Valls told Brussels that 'punishing' France would only fuel anti-EU sentiment and that Paris would not implement any reforms that would harm the economy's chances of growth.

France sends warning to EU over budget reforms
French PM Manuel Valls sends a world of warning to EU over reforms. Photo: AFP

French Prime Minister Manuel Valls said on Wednesday that EU rule-breaking France would meet all commitments to fix its bloated budget, but refuse any measures that weakened growth.

Despite calls for action from some of the EU's 28 member states, but not powerful Germany, Brussels last month gave the French government until 2017 to meet the bloc's three percent of output deficit limit.

"Any new effort (by France) that translates into weakened growth would be unwise," the pro-reform Valls said on a visit to the European Commission headquarters in Brussels.

"I would never commit France or my government to a path that would be contrary to our objectives on growth," Valls added during a joint news conference with Commission head Jean-Claude Juncker.

Struggling France, the EU's second biggest economy, has repeatedly missed its public spending targets agreed with Brussels and was under threat of penalties for breaking the rules.

In last month's deal, France committed to work down its public deficit  — the difference between government spending and revenue — from 4.0 percent of annual gross domestic product at the end of 2015 to 2.8 percent in 2017.

But in an effort to maintain some measure of pressure, the commission also ordered France to report back on reforms in three months, deeming that commitments pledged so far by Paris fell short.

Valls said the tight timetable "will be respected and all the measures to reach them will be taken".

"My message (to the EU) was clear: nothing will be done to break the momentum of reforms we have committed to," he said.

The visit by Valls came just days ahead of local elections in France, where the far right and eurosceptic National Front is widely expected to make a historic breakthrough.

Valls is leading the campaign for the ruling socialists, and warned that singling out France could fuel anti-European sentiment.

"I don't believe in a Europe that punishes, but one that acts," Valls said.

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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.