France Told Time Is Running Out as Hollande Seeks Budget Leeway

Dutch Finance Minister Jeroen Dijsselbloem urged France to stick with its deficit reduction plans, signaling his opposition to President Francois Hollande’s bid to slacken the pace of austerity.

In the wake of a rout in municipal elections, Hollande hinted on March 31 that France will seek another delay to its deficit-cutting commitments so that his new government can try to bolster economic growth with tax cuts.

“France has already had more time,” Dijsselbloem told reporters in Athens today after a meeting of European finance ministers.“Time is running out.”

The European Commission, the EU’s executive arm, must decide whether to relax targets introduced over the past three years under rules demanded by German Chancellor Angela Merkel. The limits are intended to stop governments running up the kind of debt that forced Greece to ask for two bailouts since 2010 and fueled turmoil across the region.

Last May, the EU gave France an extra two years -- until 2015 -- to narrow its deficit to below the bloc’s 3 percent of gross domestic product threshold. The Socialist French leader Hollande this week signaled he may seek another extension.

“There can be no question of undermining growth that is just returning,” Hollande said in a televised address, adding new Prime Minister Manuel Valls needs to convince Europe that France’s “contribution to competitiveness and growth will have to be taken into account with respect to its commitments.”

French Reshuffle

France didn’t have a finance minister at the Athens talks as Hollande only today named Michel Sapin in the post to replace Pierre Moscovici after a rout in nationwide municipal elections.

France’s public deficit amounted to 4.3 percent of GDP in 2013 instead of the 4.1 percent target set in September, national statistics office Insee said this week. The 4.1 percent goal had already been watered down from the 3.7 percent 2013 deficit Hollande had promised in April last year.

“What is important now is that France takes the necessary structural reforms that are required this year,” EU Economic and Monetary Affairs Commissioner Olli Rehn told reporters yesterday. “It is essential that France acts decisively.”

Debt Load

Dijsselbloem, who leads meetings of euro area finance ministers, also chided Italy for backsliding.

“Italy has to do a lot of reforms, which have been awaited for a long time,” he said.

Italy’s public debt rose to 2.07 trillion euros ($2.85 trillion) or 132.6 percent of GDP last year, from 127 percent in 2012, national statistics office Istat said on March 3. Italy has the second-biggest public debt as a percentage of GDP among the 18 euro countries, after Greece.

The European Central Bank last month said Italy has made “no tangible progress” to reduce its deficit, which last year was unchanged at 3 percent of GDP. Italy faces a “major challenge” in achieving strong growth and lowering its public debt, the commission said in a report on March 5.

Italian Finance Minister Pier Carlo Padoan told reporters today that he had discussed “structural reforms” and fiscal policies with finance ministers and that Italy wants to avoid being placed under special monitoring because of lack of progress in achieving deficit and debt levels.

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