France is likely to be penalised when its budget is scrutinised this Wednesday by the European Commission.
Paris has not been complying with the EU rules, and doesn’t intend to comply for a while, and the Commission is authorised to send the budget back. The French are risking censure for disagreeing with German-led austerity policies.
But Paris is standing firm, arguing that the current circumstances are exceptional.
Finance Minister Michel Sapin said: “We’re aware of the serious nature of the budget; we reject austerity; the deficit will return within [the] three percent [limit] in 2017.”
The deficit is 4.4 percent this year. It’s projected to still be 4.3 next year. But by 2017, Paris predicts 2.8 percent.
France’s public debt has surpassed the euro zone average, standing at 93.5 percent, compared to 78.4 percent for Germany.
In spite of the 50 billion euros of savings the government is promising to reduce the budget by from now till 2017, it acknowledged the total volume of public spending would still rise slightly. It’s already ten points higher than Germany’s.
France’s 45 percent tax burden — the GDP share — is still among the highest in the world. Only Denmark and Belgium’s are higher.
Paris could be looking at a four billion euro fine for flouting the EU budget rules. It probably can’t get out of it, since smaller countries have been forced to make sacrifices, unless it can prove its plans are credible.
Economist Marc Touati said it can’t: “We’re not taking real measures. We need shock therapy, and that has never been applied, either by Sarkozy or Hollande. We’re going to keep racking up deficits and swelling debt.”
The government argues that further austerity could snuff out a fragile euro zone recovery. Italy, Greece, Ireland and Spain’s thinking tends that way too. Prime Minister Matteo Renzi has climbed on board as well, to try to persuade Chancellor Angela Merkel, along with President François Hollande. They want flexible budgetary discipline.
Hollande said: “We also have to adjust our budget policies in relation to growth stakes because if everyone applies austerity, which isn’t the case for France, there’ll be an even bigger slowdown in growth.”
The Socialist leader’s personal ratings are an abysmal 13 percent. Even allies in the French parliament say the 2015 budget is too austere with too many spending cuts, while European Union officials warn the plans don’t go far enough.