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

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

How to build a more resilient and inclusive global system

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

Impact Investment needs global standards and better measurement

FROM THE FIELD: ‘Miraculous’ music made by hearing-impaired children

On Youth Education: “Just a normal day in the life of a medical student”

EU-Turkey relations: Will Turkey manage to revive the EU accession process talks?

Multilateralism more vital than ever, as World War centenary looms: Security Council

ECB steadily continues monetary easing policy as EU economy gains momentum

October’s EU strong digital mix: From Safe Harbour to Net Neutrality, Roaming and Snowden

Europe turns out more jobs this summer

EU regional differences betray an unjust arrangement

World Retail Congress Dubai 2016: Retail’s night of nights

WEF Davos 2016 LIVE: Banking moguls continue brandishing financial Armageddon to intimidate us all but in Davos they worry about the very distant future

“There are many converging visions and interests between the One Belt One Road initiative and the Juncker Investment Plan”, Ambassador Yang of the Chinese Mission to EU highlights from Brussels

Could switching between summer and winter time end in 2021?

Parliament ready to fight for a different EU budget

Why are the financial markets shivering again?

Parliament makes it easier to organise a European Citizens’ Initiative

Military escalation will have ‘serious consequences’ for Yemeni civilians, warns UN Special Envoy

Austerity ends in Eurozone, Germany is isolated

This is why Dutch teenagers are among the happiest in the world

Does the EU want GMOs and meat with hormones from the US?

MEPs want ambitious funding for cross-border projects to connect people

Data show EU Economy in a stubbornly subdued state

Silk Road Unlimited

EU to Google: How to dismantle European search engines in 13 steps

Burundi: Inclusive dialogue ‘only viable option’ for resolving country’s political crisis says, UN envoy

It’s time for the circular economy to go global – and you can help

The next 48 hours may change the European Union

CHINA: five letters that could mean…

Faith can overcome religious nationalism. Here’s how

Our Digital Future

‘Agile’, multilateral response vital to combat terrorism – UN chief Guterres

Teamgum @ TheNextWeb 2014

Dangerous Trumpism in the Middle East with an anti-European edge

Charlie’s tragedy energized deeper feelings amongst Europeans; back to basics?

Food system failures in our age of abundance

South Korea once recycled 2% of its food waste. Now it recycles 95%

US prosecutors now target Volkswagen’s top management, upsetting Germany

EU to increase spending and improve delivery of education in emergencies and protracted crises

UN lauds special chemistry of the periodic table, kicking off 150th anniversary celebrations

UN expert condemns new sentence for jailed Venezuelan judge as ‘another instance of reprisal’

The deforestation risks lurking in the banking sector

Brexit effect: Public opinion survey shows that EU is more appreciated than ever

Disaster Medicine in Medical Education: the investment you just can´t afford to ignore

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

EU Youth Report casts stark light on life for young Europeans

Syria: UN-backed watchdog says chemical weapon ‘likely used’ in February attack

“Two Pack” approved: Is democracy chased away from Brussels?

China Unlimited: an exclusive interview with the former Ambassador of Hungary to China

Can a Bavarian Oktoberfest beer indulger bring down the Berlin government?

3 autonomous vehicle trends to follow in 2019

UN’s Grandi slams ‘toxic language of politics’ aimed at refugees, migrants

Why the Fourth Industrial Revolution needs more arts graduates

Cyprus banks under scrutiny

This forgotten element could be the key to our green energy future. Here’s why

The European Sting @ the European Business Summit 2014 – Where European Business and Politics shape the future

If people aren’t responding to climate warnings, we need to change the message

Mali facing ‘alarming’ rise in rights violations, warns UN expert

10 million Yemenis ‘one step away from famine’, UN food relief agency calls for ‘unhindered access’ to frontline regions

On eve of Gaza border protest anniversary, UN’s top humanitarian official for Palestine calls for calm

EU-U.S. Trade Talks: European Commission presents draft negotiating mandates

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