Posted on 09/02/2003 10:24:28 AM PDT by knighthawk
France's public finances have "gone off the rails" this year and are so bad they could push the whole eurozone deficit over the European Union's treaty limit, the European Commission warned on Tuesday.
There was undisguised dismay in Brussels over the revelation by Paris that it expects its deficit in 2003 to rise to 4 per cent of GDP, well above the 3 per cent limit set in the EU's stability pact.
A spokesman for Pedro Solbes said the latest budget slippage in France meant that the overall deficit for the 12-country euro area could exceed 3 per cent of GDP.
"Given the fact that France seems to have gone off the rails a bit in 2003, the eurozone deficit will be around 3 per cent or could exceed the 3 per cent figure," he said.
France and Germany, the eurozone's two biggest economies, are both currently in breach of the stability pact, with Portugal also risking breaching the rules this year.
The Commission's warning will concern those members of the single currency with sound public finances, who fear the knock-on effects of big deficits in other euro-area countries.
Countries like Spain, Austria and the Netherlands have been particularly critical of France, claiming that the euro could be weakened by its failure to control its deficit.
But France warned again on Tuesday that its first priority was to restore growth to the national economy, rather than making budget cuts at a time of stagnant growth.
"We think it will be difficult to substantially reduce the deficit next year," Noelle Lenoir, French Europe minister, told a Paris briefing on France's European policy over the next year.
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French Budget Deficit May Push Entire Eurozone Over Limit
Douglas Bakshian
The European Commission says France's large budget deficit could push the entire "eurozone," over its deficit limit this year. The eurozone is the 12 nations that use the common euro currency.
The report came from the European Commission's monetary affairs spokesman Gerassimos Thomas in Brussels. He says France's forecast of a four percent deficit in 2003 is significantly higher than what the French government recently told EU finance ministers to expect.
Mr. Thomas says this has implications for the larger 12-nation eurozone.
"Given the fact that France seems to have gone off the rails a bit in 2003, the eurozone deficit will be around three percent, if not exceeding the three percent figure," he said. "Of course this will have an effect on the general eurozone."
The countries in the eurozone are under an economic pact that sets a three percent limit for deficits.
Mr. Thomas says Paris will have to impose more budget discipline next year. But France says that will be difficult. French Budget Minister, Alain Lambert, says the country will try to reduce its deficit, in line with its international commitments, but he said the government's first duty is to restore economic growth and create jobs.
Both France and Germany, the two largest eurozone economies, are far above their deficit limits.
http://www.voanews.com/article.cfm?objectID=F31773C1-8355-4683-85373C8F310986D9&title=French%20Budget%20Deficit%20May%20Push%20Entire%20Eurozone%20Over%20Limit&catOID=45C9C78C-88AD-11D4-A57200A0CC5EE46C&categoryname=Europe
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Or as we would say here, "the wheels have come off." Stupid Socialists.
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