France warned by EU over breaching budget rules

France warned by EU over breaching budget rules
France is in the spotlight over its budget. Photo: AFP
The EU warned France on Wednesday that it risks breaching the bloc's tough public spending rule next year.

France was one of eight countries – with Italy, Spain, Portugal, Belgium, Slovakia, Slovenia and Finland – that were in the EU's cross-hairs for bloated budgets.

Often flouted, the EU rules on public debt and deficits are the cornerstone of eurozone membership: Countries using the single currency are asked to limit deficit spending to three percent of GDP and overall debt to 60 percent.

Of particular concern for Brussels was Italy's mountain of debt that is expected to balloon to a huge 136.8 percent of GDP, the highest in the eurozone except for bailed out Greece.

France's debt is expected to hit 98.9 percent of GDP at the end of 2020.

France, Italy, Belgium and Spain “have not sufficiently used favourable economic times to put their public finances in order,” said commission vice president Valdis Dombrovskis.

“In 2020, they plan either no meaningful fiscal adjustment or even a fiscal expansion,” he added.

In order to fight ballooning debt, national governments are under orders from the commission to reduce long-term costs such as public pensions or to make it easier to legally hire and fire workers.

Rome and Paris are in disagreement with the EU on the ambition of pledged reforms, and will have to negotiate with Brussels over the coming months in order to avoid potential penalties next year.

A year ago, for the first time, the European Commission rejected a national budget when it turned down Italy's 2019 spending plans that were submitted by the populist far-right coalition.

After loudly refusing to cave to Europe's demand, Rome later acquiesced and accepted the tighter spending and debt reduction demanded by Brussels.

The commissioner on Wednesday lauded surplus-running Germany and the Netherlands for taking the “first steps towards a more expansive fiscal policy”.

Both countries have been under pressure to boost spending to stimulate growth across Europe, which has been underperforming, especially in manufacturing.

“This is excellent news for the growth of these countries, of course, but also for the eurozone as a whole,” Moscovici said.

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