Posted on 05/07/2003 8:02:40 PM PDT by blam
France given EC deficit deadline
Andrew Osborn in Brussels
Thursday May 8, 2003
The Guardian
France came under unprecedented pressure yesterday to stop flouting the rules that govern the euro after the European commission gave Paris less than six months to tackle its wayward budget deficit or face the consequences. In a humiliating swipe at the French government, the EC ordered Paris to take remedial action to bring its budget deficit below the maximum 3% threshold allowed under EU rules by October 3 at the latest. It also stipulated that any measures taken would have to bear fruit by 2004.
France's deficit came in at 3.1% last year and the EC warned it was likely to swell to 3.7% this year as a result of generous tax cuts and heavy government spending.
Under the EU's stability and growth pact, which underpins the single currency, budget deficits must not exceed 3%. Germany and Portugal have fallen foul of the pact in the past. The EC's ultimatum to France - the eurozone's second largest economy - will have to be approved by EU finance ministers including Gordon Brown at a meeting in Brussels next month, but that is seen as a formality.
If France then fails to respect the deadlines it could be fined up to 0.5% of its gross domestic product.
To make matters worse, the EC said yesterday that France's budget woes were entirely of its own making. There was no severe downturn nor, it added, was there any "unusual event outside the control of the French authorities".
French debt levels were also a cause for concern. Brussels said they were poised to shatter the hallowed ceiling of 60% of GDP - a prerequisite to join the euro in the first place - and urged preventive action.
France has already said it will freeze public spending next year at 2003 levels and ensure its budget deficit is reined in.
It's gonna be fun watching them come unglued.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.