EU halts France and Germany deficit process

14th December 2004, Comments 0 comments

BRUSSELS, Dec 14 (AFP) - The European Union executive Tuesday removed France and Germany from a list of countries in breach of an EU deficit limit but warned it would remain vigilant over their national finances.

BRUSSELS, Dec 14 (AFP) - The European Union executive Tuesday removed France and Germany from a list of countries in breach of an EU deficit limit but warned it would remain vigilant over their national finances.

EU economic affairs commissioner Joaquin Almunia said that in light of efforts by the two countries to reduce their deficits, and a court ruling upholding Brussels' right to police their finances, "it would appear that no further steps are required at this point".

But he added in a statement: "The budgetary situation remains vulnerable in the two countries.

"Should the corrective measures fail, the commission would have to recommend to the Council (of EU member states) to enhance budgetary surveillance," the Spanish commissioner said.

France and Germany are on course to breach the public deficit ceiling laid down in the EU's Stability and Growth Pact - 3.0 percent of gross domestic product (GDP) - for a third year running this year.

But the eurozone's two biggest economies left the pact in tatters in November 2003 by persuading their EU partners to put the threat of financial punishment against deficit miscreants on hold.

In a ruling in July, the European Court of Justice said that EU countries had no right to put the pact "in abeyance", confirming the European Commission's right to launch "excessive deficit procedures" in the first place.

In its statement, the EU executive said the time lag created by the wait for the court judgement meant that 2005 should be viewed as the correct target for France and Germany to get their deficits under the 3.0 percent limit.

"The commission concludes that the two countries appear to be on track to correct their excessive deficits by 2005," it said.

Brussels said the German deficit was projected to fall to 2.9 percent of GDP in 2005, from a forecast 3.9 percent this year.

For France, the deficit would go down to exactly 3.0 percent from an expected 3.7 percent in 2004, it said.

The deficit predictions are based on commission forecasts for GDP growth in Germany next year of 1.5 percent and in France of 2.2 percent.

But many economists doubt that the French and German public deficits will indeed fall below 3.0 percent in 2005 given weaker-than-expected economic growth.

© AFP

Subject: French News

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