France and Italy will get different treatment under EU budget rules, because the situation of their public finances is different, the chairman of eurozone Finance Ministers, Jeroen Dijsselbloem, said on Friday. Under EU rules, governments must keep budget deficits below 3 per cent of gross domestic product and reduce public debt below 60 per cent of GDP or face disciplinary action.
France signalled last week it would welcome more time to bring its budget deficit of 4.3 per cent of GDP to within the EU limits to help growth. Under the current deadline, already extended last year, Paris has to do so by the end of 2015.
Italy has a deficit below 3 per cent, but a public debt of more than 130 per cent of GDP, which, under EU rules, it is also obliged to reduce. Italian Prime Minister Matteo Renzi on Friday stepped up his calls for new rules on budget limits in the eurozone, saying the current framework is hurting growth and costing jobs.
"Having rules that are all centered on austerity and rigour is a waste of time if unemployment doubles", Renzi told a conference in Milan, adding that Italy would use its six-month presidency of the EU from July to push for changes. In recent days Renzi has repeated that Italy will keep a lid on its budget deficit and adopt reforms to make its economy more competitive.
Italy's budget deficit has come in bang on the EU's 3 per cent of GDP limit in each of the last two years but its public debt, the second highest in the eurozone after Greece's, has risen steadily. It reached a record of almost 133 per cent of output in 2013 and is forecast to rise further this year.
Italy hopes that, with France seeking more time to lower its budget deficit and growing anti-austerity sentiment around the eurozone, the approach may be more warmly received when Italy renews the proposal in the second half of this year. Some eurozone policy makers are concerned that the second and third biggest eurozone economies could try to join forces to weaken the budget rules that were sharpened in 2012 to prevent a repeat of the sovereign debt crisis.
"There is a difference between France and Italy," Dijsselbloem told Reuters in an interview on the sidelines of the IMF's annual meeting. "Some people think they are in the same situation, that they are pleading in the same way, but they are not," Dijsselbloem said. "They have different obligations and hence they will be treated differently."
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