These reports cards, and the resumption of the Stability and Growth Pact rules in general, come at a critical time with Europe’s economic growth remaining feeble and high interest rates making borrowing more expensive. Russia’s war in Ukraine and growing tensions in the Middle East add to uncertainty for governments and central banks in Europe and beyond.
‘Whatever it takes’
Pressure on France shifts the focus from Italy, which has long been considered the bad boy of Europe when it comes to public spending. Rome isn’t fully out of the woods: its budget is “not fully in line” with the rules, the Commission said. The same goes for Austria, Germany, Luxembourg, Latvia, Malta, Netherlands, Portugal and Slovakia.
French Finance Minister Bruno Le Maire has repeatedly stressed that France’s 2024 budget would mark the end of the era of “whatever it takes” in economic spending, pledging to phase out emergency measures linked to the pandemic and the energy crisis.
As the Commission announced its assessments, a French economy ministry official was quick to stress Paris was unlikely to be punished with an Excessive Deficit Procedure and that it would not need to modify its budget law.
“We won’t have to take any adjustment measure on this evolution of primary net spending,” the official said, on condition of anonymity, noting that the gap between France’s spending and Brussels’ recommendation was “very small.”
The official insisted that, contrary to other EU countries, France did not receive a written request from Brussels.
Paris sees a deficit next year of 4.4 percent of GDP — exceeding the EU’s 3 percent threshold — and spending cuts of €5 billion. The French budget is still being discussed in the country’s parliament and is set to be approved by Christmas.
The Commission also raised concerns France’s debt-to-GDP ratio will rise to 110 percent of GDP next year. The EU’s limit is 60 percent.
