France breaks budget promises once again and the EU’s finance offices are shaking

François Hollande, giving the French Legion of Honour to José Manuel Barroso at the Elysee Palace in Paris  (EC Audiovisual Services, 9/07/2014)

François Hollande, giving the French Legion of Honour to José Manuel Barroso at the Elysee Palace in Paris (EC Audiovisual Services, 9/07/2014)

Last Wednesday, just two days before Eurozone’s finance ministers met for informal talks in Milan, the news had come in: France will not achieve a 3% EU budget deficit target this year. During a conference in Paris, the French finance minister Michel Sapin said that the country’s budget deficit will be around 4.4% of GDP in 2014 and will not go below 3% until 2017, allowing just a slight drop to 4.3% next year. Obviously this announcement had some impact on Milan talks as will hit the general feeling about a quick recovery for the EU’s economic situation. That was absolutely predictable though.

France has already missed a number of budget deficit targets. It had missed a 2013 deadline and got a two-year extension, until 2015, from the EU finance ministers. Paris was expected to bring its budget deficit below the EU cap of 3% of GDP next year, after exceeding the limit for six years in a row. Mr Sapin also lowered the country’s growth projections for this and next year. Projections for growth were lowered from an estimate 1% to 0.4% in 2014, and down from 1.7% to 1% in 2015.

On top of that the announcement was indeed the last of a number of statements by the French government that it was struggling to maintain its deficit commitments, along with calls for the European Union to have more flexibility applied in its Stability and Growth Pact mechanism. On top of that, many analysts warned about the risks of another budget promise break in August, right after Moody’s announced this chance and branded France’s fiscal performance “significantly weaker” than top-rated countries’ one. Expected or not, the news generated some veiled criticism in Milan’s meeting rooms on Friday and Saturday, with EU senior financial officers reportedly remarking the sacrifices that other countries had to make to get their finances in order.

This huge back step of the second largest economy of the Eurozone is clearly another round of the whole hot debate on the effectiveness of the “austerity way” or the benefits that a more “flexible approach” would bring to the system. I would dare to say that this is a very important case indeed, as it might be a turning point in the evolution of the EU fiscal rules.

During the EU’s economic crisis the general decision was to enforce the 3 per cent rule and to keep austerity as the main way of executing it. As widely known Germany is one of the main supporters and guardians of the austerity way, with Chancellor Angela Merkel repeatedly saying that respecting the 3% deficit target is the only way to promote growth within the 28-member currency zone. The feeling now is that France’s fiscal issues are a source of deep concern in Berlin, who fears Paris will not take difficult economic decisions. Also the case of France’s economy is seen as the last resort to confirm the bloc’s fiscal regime and to guarantee that the Commission as the ability to enforce the rule book for real.

The latest budget deficit may cause issues to France’s President Hollande on the political side as well. He is already highly unpopular in his country and this matter may represent another heavy blow to his credibility. Last year he predicted a recovery in 2014, but the country has continued to struggle with high unemployment and stagnant growth.

Mr. Hollande and Mr. Sapin are pointing their finger to a broader lack of growth in Europe as the main reason of France’s results. Sapin said “an economic reality that concerns all of us” needs to be taken into consideration. In an interview at Le Monde earlier this month Mr Hollande said: “We implement the announced reforms, but the pace of efforts to reduce the deficit also depends on growth”, as reported by the Financial Times one month ago.

The French President has lobbied alongside the Italian Prime Minister, Matteo Renzi, for a much more flexible approach by the EU commission on the GDP/debt rules (Italy’s GDP growth is forecast to be zero this year) and he is expected to maintain this course of action.

Minister Sapin told on a news conference that France was not asking for any change in the European Union’s rules on budget limits anyway. The debate continues, as the European Union’s incoming commissioner for economic and financial affairs, France’s former finance minister Pierre Moscovici, referred to the missed budget deficit target as a “serious problem”.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Amid ‘volatile’ environment, UN mission chief urges Iraqi leaders to ‘listen to the voice of the people’

Climate change recognized as ‘threat multiplier’, UN Security Council debates its impact on peace

Turkey presents a new strategy for EU accession but foreign policy could be the lucky card

Don’t dismiss start-ups founded by millennials. This is how they succeed

The ‘abuse of food relief in Yemen’ must end now

A young student discusses the determinants of migration in the European Union

EU to present a “hefty” exit bill to the UK moments before Brexit negotiations

Brazilian public health system and universality: a forgotten right!

The ethics of the Medical Technology Civilisation era

Special measures for Greece: 100% absorption rate

Globalization is changing. Here’s how your business can adapt

The EU Parliament slams Commission on economic governance

UN committed ‘to support the Libyan people’ as Guterres departs ‘with deep concern and a heavy heart’

The Free World Experience Report – LGBTQI+ health on the spot

Women’s leadership ‘critical’ to future of Niger

Chicken soup for the digital soul: how to bring community back online

Legal Manager – 2050

The future of science could be in your gut. Here’s why

Traditional knowledge at ‘core’ of indigenous heritage, and ‘must be protected’, says UN Forum

Bring killers of journalists to justice: UN agency seeks media partners for new campaign

World faces ‘climate apartheid’ risk, 120 more million in poverty: UN expert

Here’s how data can shine a light on financial crime

Joint UN-Red Cross appeal to end rising sexual violence as a weapon of war

Efforts to save the planet must start with the Antarctic

Global aid needed for healthcare

EU and New Zealand launch trade negotiations

Climate change and its adverse impacts on health

Parliament backs new CO2 emissions limits for cars and vans

What brands get wrong about China – and how to put it right

Global Trade Identity can be the cornerstone of paperless trade

Europe, US and Russia haggle over Ukraine’s convulsing body; Russians and Americans press on for an all out civil war

A Europe that Protects: Commission calls for more efforts to ensure adoption of security proposals

The UN went to one of the world’s richest countries to look at poverty – this is what it found

These are the 4 most likely scenarios for the future of energy

7 surprising and outrageous stats about gender inequality

‘We need to do more’ to transform the world, deputy UN chief tells African audiences

Growing up near green space is good for your mental health as an adult

Night owls, rest easy

Evacuation of wounded Yemenis from rebel-held capital may bolster fresh peace talks

As the Universal Declaration of Human Rights turns 70 – is it time for a new approach?

EU-US trade war: Will Trump take advantage of WTO’s decision leading to ominous economic growth?

Mental health in medical students: the deciphered quandary

MEPs criticise “America first” policy

MEPs back plans to promote water reuse for agricultural irrigation

The 27 EU leaders did nothing to help May unlock the Brexit talks

“Beating pollution for our planet”, a Sting Exclusive by Mr Erik Solheim, the Executive Director of the United Nations Environment

A Sting Exclusive: “Without climate, forget about peace!”, Swedish MEP Bodil Valero cautions from Brussels

Syrians still living on ‘razor edge’ as UN launches $8.8 billion dollar appeal

This is how much people would pay to use some of the world’s most popular apps

New EU rules to boost crowdfunding platforms and protect investors

Japan initiates WTO dispute complaint against Korean duties on steel

New energy security framework will help meet growing needs in East Africa, sustainably – UN economic wing

Building cybersecurity capacity through benchmarking: the Global Cybersecurity Index

Why our future relies on more inclusive and transparent innovation

Electronic or conventional cigarettes – which is safer?

Make progress or risk redundancy, UN chief warns world disarmament body

‘Unconscionable’ to kill aid workers, civilians: UN Emergency Coordinator

Freshwater is saltier – and it’s bad for the planet and our health

Solidarity Corps: more opportunities for young people

Following the World Cup? Then you’re watching high-performing migrants at work

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s