Hollande’s Rising Deficit Sharpens EU Scrutiny of French ReformMark Deen
France’s breach of a deficit reduction plan agreed under European rules is increasing scrutiny from its partners about President Francois Hollande’s progress on overhauling his nation’s stalled economy.
French Finance Minister Michel Sapin said this week that the budget deficit will increase for the first time in five years, reaching the equivalent of 4.4 percent of gross domestic product instead of the 3.8 percent agreed earlier with the European Commission. The shortfall was 4.3 percent in 2013.
The reversal comes in the wake of two straight quarters in which Europe’s second-largest economy failed to expand and after France was already granted two delays to reach the European Union deficit limit of 3 percent. Asked about France, officials at a euro-area finance ministers’ meeting in Milan today responded generally, indicating fiscal leeway for all member states would be judged in the light of broader efforts to bolster growth.
No matter how much monetary, or even fiscal stimulus is provided, “we won’t see much growth coming unless there are serious structural reforms,” European Central Bank President Mario Draghi told reporters after the meeting. Progress on deficit reduction shouldn’t be “unraveled,” he added.
With countries such as Spain showing renewed expansion after receiving financial support and implementing harsh changes to labor rules and pensions, France’s problems are regarded as self-inflicted.
“A lot of work has been done, particularly by those countries who have been hit hardest by the crisis,” Eurogroup President Jeroen Dijsselbloem said when asked about France. Countries “will be judged on progress on structural reforms,” he said.
France is due to provide its 2015 budget plan to the European Commission by Oct. 15.