23 February 2015

Reuters: Moscovici raises threat of French budget sanctions but eyes deal

The European Commission is due to say in early March whether it considers France's efforts to reform its economy and cut its deficit sufficient, after its repeated failures to meet its fiscal goals.

While the euro zone's second-largest economy could theoretically face a fine, the Commission is widely expected to grant it a reprieve in exchange for promises of reform.

"I hope we are going to reach a good deal, a good deal is always better than bad sanctions," EU Economics and Monetary Affairs Commissioner Pierre Moscovici told France 2 television. "But sanctions may be necessary if there is no deal."

Moscovici, himself a former French finance minister, said it was vital that Paris meet an EU target to reduce its structural deficit, which excludes cyclical effects, by 0.5 percent of GDP this year. 

"Talks have progressed well, but there can be no exception to the rules," he said, adding that the Commission was in particular eyeing further labour market reforms.

Moscovici made clear that he was aiming for the Commission to push back its deadline for France to bring its overall public deficit under the euro zone ceiling of 3 percent of GDP.

While the EU executive's 28 members met on February 25, they may only announce their decision on the budget slippages of France, Italy and Belgium in early March.

"There is one thing that is clear: It is that the 3 percent promised for 2015 won't happen. We will therefore have to extend that deadline. The question is under what conditions this is done."

The Socialist government is expecting to bring its public deficit down to 4.1 percent of GDP this year from an estimated 4.4 percent last year, having pledged to finally come into line with EU rules this year.

German business daily Handelsblatt reported February 23 that France wants to delay a target for bringing its budget deficit below 3 percent of GDP by three years until 2018, citing European Commission sources.

Moscovici said an economic reform law aimed at liberalising various professions was a step in the right direction and welcomed the fact that the government forced it through parliament by decree last week as a sign of its determination.

But he said France must go further.

Full article on Reuters

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