France faces EU budget showdown

GMT 21:40 2014 Wednesday ,15 October

Arab Today, arab today France faces EU budget showdown

French President Francois Hollande
Brussels - AFP

 France headed for a showdown with the EU over its 2015 budget Wednesday with deficit-ridden Paris under threat of becoming the first country to have its spending plans rejected by Brussels.
Eurozone countries have until midnight to submit their draft budgets to the European Commission and all eyes are on France, considered the new "sick man" of an increasingly unhealthy Europe.
Paris announced last month that next year's budget deficit -- the shortfall between revenue and spending -- will hit 4.3 percent of annual economic output, far above the 3.0-percent ceiling set by the European Union for member states.
In a stark warning, the government of French President Francois Hollande said the deficit would not drop to this level until 2017.
Recession-hit Italy is also under the EU microscope, with the cabinet of Italian Prime Minister Matteo Renzi set to meet just hours before the Brussels deadline to discuss Rome's budget.
The European Commission, the EU's executive branch, has two weeks to decide whether countries' budget submissions break the rules.
- Reform plans -
As Brussels waited for the budget plans, France's economy minister Emmanuel Macron announced a flurry of reforms geared to send the message that Paris was serious about pushing through tough reforms.
The measures include breaking open highly protected sectors to wider competition and a wave of state company privatisations.
But the pledges would not be included in the 2015 budget, setting up a major test of the EU's resolve to apply the rules to the bloc's second-biggest economy and a founding member.
French officials earlier this week said the budget sent to Brussels would not deviate from the already announced numbers.
The Commission has newly acquired powers to enforce the deficit limit, and could send the budget back to Paris in an unprecedented demand by Brussels for changes to a national spending plan.
Failure to reach a  deal could also alarm financial markets and cause a political crisis at a time when the world's eyes are already watching for the possibility that Europe could slip back into a triple-dip recession.
Germany, the EU's most powerful country, is thought to be working behind the scenes to give Paris a way to avoid disgrace at the EU, while also securing a far firmer commitment to reform.
Hollande's Socialist government, which is hugely unpopular and faces the growing influence of the extreme right, has sent very mixed messages at the calls to do more to respect the agreed eurozone budget rules.
"We decide the budget," Prime Minister Manuel Valls said on Saturday as he warned his European partners to "respect France, a big country."
- Far-right leader -But Marine Le Pen, the French far right leader, raged on Wednesday that France's budget sovereignty "no longer existed."
On the other hand, some EU countries are concerned that France will benefit from a double standard, with smaller countries facing Brussels' wrath even as big countries get off lightly.
"There can be no favouritism, the rules are the same for everyone," Spanish Economy Minister Luis de Guindos said on Monday.
Analysts predicted France will put forward "extremely technical" arguments as well as the new promises of reform.
Capital Markets in London said that the submission of a budget flouting EU rules "will be a key test of EU authorities' resolve".
At a meeting of eurozone ministers on Monday, Sapin hinted that EU-friendly amendments could be made in the French parliament which is currently reviewing the budget.
France also announced major cuts in defence spending, including the scrapping of an artillery regiment and the loss of 7,500 jobs.
In Rome, Renzi is walking a tightrope between defending France's stance and keeping in the good graces of the Commission as Italy also fails to meet its fiscal targets.
The budget forecasts the public deficit will come in at 2.9 percent in 2015 -- under the 3.0 percent EU ceiling and a marginal reduction of 0.1 percent on the 2014 figure, but considerably less than the 0.5 percent reduction requested by the Commission.

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