The EU Commission has advised seven countries, including France, to initiate an ‘excessive deficit procedure,’ marking the commencement of a drawn-out process that could eventually compel member states to implement corrective measures
The European Union’s executive branch has delivered a sharp critique of France for its excessive debt levels, a move that comes at a critical time during President Emmanuel Macron’s election campaign, as he faces formidable opponents from both the extreme right and the left.
The EU Commission has advised seven countries, including France, to initiate an “excessive deficit procedure,” marking the commencement of a drawn-out process that could eventually compel member states to implement corrective measures. EU Commission Vice President Valdis Dombrovskis announced, “Deficit criteria is not fulfilled in seven of our member states,” identifying Belgium, France, Italy, Hungary, Malta, Slovakia, and Poland as the nations falling short of expectations.
For years, the EU has established benchmarks for member states to maintain their annual deficit below 3% of Gross Domestic Product and total debt under 60% of output. These guidelines have been overlooked at times, even by leading economies such as Germany and France.
However, this time around, Dombrovskis emphasized that any decisions “needs to be done based on, say, facts and whether the country respects the treaty, reference values for a deficit and debt and not based on the size of the country.” France’s annual deficit was reported at 5.5% last year.
In recent years, extraordinary situations like the COVID-19 pandemic and the conflict in Ukraine have warranted a degree of flexibility, but this period of leniency has now ended. The announcement on Wednesday has ruffled feathers in France, following Macron’s decision to call snap elections after his defeat to Marine Le Pen’s hard right in the EU parliamentary polls on June 9.
Le Pen’s National Rally and a newly united left front are currently leading in the polls ahead of Macron’s party for the upcoming elections, with both challengers proposing plans that rely heavily on deficit spending to pull the country out of its economic slump.
Macron’s camp could potentially use this reprimand as a warning that extreme measures will lead France to ruin during the election campaign, while the opposition could argue that Macron’s overspending has only further impoverished the French, leaving them with no other option but to spend even more.
Despite the criticism over excessive debt, EU Economy Commissioner Paolo Gentiloni emphasised that France is also making progress in addressing certain “imbalances,” offering a “message of reassurance” to EU institutions. The International Monetary Fund predicts that the French economy will grow at a relatively slow pace of 0.8% of GDP in 2024, before increasing to 1.3% in 2025.
And unlike the measures imposed on Greece during its dramatic fiscal crisis a decade ago, he said that excessive austerity was not an answer for the future. “Much less does not mean back to austerity, because this would be a terrible mistake,” he said.
He also questioned the statement of austerity itself driving voters towards the extreme right, highlighting that lenient budget circumstances have been in place for the past years yet it still let the hard right emerge victorious in many member states.
“Look to what happened in the recent elections. If the theory is ‘less expenditure, stronger extremes,’ well, we are not coming from a period of less expenditure,” stated Gentiloni.
