France receives new warning from EU on budget discipline

In a report on France’s mid-term economic forecasts, the European Union’s executive body said that the French government’s budgetary plans “lack ambition,” and warned that Paris is set to burst the deficit ceiling of 3 percent of gross domestic product through 2007.

Italy, Greece, and two of the EU members considered best at budgetary management, the Netherlands and Britain, were warned that their deficits risked breaching the ceiling, the commission said in separate reports on each country.

The warning to member states came as the commission filed a lawsuit against them at the European Court of Justice in Luxembourg. The commission charges EU governments prevented it from penalizing France and Germany from for repeatedly breaching the 3 percent deficit ceiling.

“Europe is going through a difficult period, both in terms of actual developments and as regards the implementation of the EU framework for fiscal surveillance,” European Monetary Affairs Commissioner Pedro Solbes said at a news conference.

“We think the risk of breaching the 3 percent threshold in case of unfavorable macroeconomic circumstances is very real,” he added.

When he announced this month that he would take the member states to court, Solbes also said that the commission would review the excessive deficit rules, which are now causing a problem for many countries.

France would have to cut its spending further if it is to bring its budget into conformity with the rules by 2007, the report said.

 

Britain is heading for a budget deficit of 3.3 percent during the 2003-2004 financial year, the commission said, and the Netherlands may also breach the 3 percent ceiling in the coming years.