Bank of France argues for tighterEU budgetary rules

24th August 2004, Comments 0 comments

PARIS, Aug 24 (AFP) - The Bank of France is seeking European Union-wide restrictions on exceptional budgetary measures that member states use to reduce their public deficits.

PARIS, Aug 24 (AFP) - The Bank of France is seeking European Union-wide restrictions on exceptional budgetary measures that member states use to reduce their public deficits.

In its August monthly bulletin, the central bank called for "an improved framework on exceptional budgetary measures".

The bank said the potential long-term economic effect of certain exceptional measures was "nothing, even negative", and pointed to equalisation payments made by businesses to the states, which then pay for the retirement of the companies' employees.

The bank's position on the issue comes as the public electricity giant Electricite de France (EDF) is set to pay the state an equalisation payment, which Finance Minister Nicolas Sarkozy has recognised would help the state bring down its deficit below the EU's ceiling of 3.0 percent of gross domestic product.

EDF is expected to pay at least eight to EUR 10 billion (USD 9.7-12.1 billion), or equivalent of about 0.6 percentage points of GDP.

The central bank warned that use of exceptional measures "cannot substitute for efforts in budgetary structural reform ... in fact only delays them several years, at the risk of giving the illusion that the deterioration of the public finances is being limited and to make, in this situation, the unavoidable adjustment more difficult to the countries concerned."

The bank called for the adoption of a definition of exceptional budgetary measures common to the whole of the 25-state EU.

It also urged special monitoring of the measures to better calculate structural deficits in a bid to formulate public accounting that would permit, for example, the evaluation of real financial interest on equalisation payments.

These decisions would allow the preservation of transparency in public finances, provide a gauge for an objective analysis of their sustainability and "reinforce the coherence and credibility of the European budgetary surveillance framework," the bank said.

France, which is in breach of the EU's deficit rule, has pledged to rein in its public deficit below the limit of 3.0 percent of GDP in 2005.

© AFP

Subject: French news

0 Comments To This Article