France budget 'vulnerable', warns EU executive

2nd February 2005, Comments 0 comments

BRUSSELS, Feb 2 (AFP) - The European Commission called on the eurozone's three biggest economies Wednesday to tighten their budgets further to ensure they meet strict EU fiscal rules.

BRUSSELS, Feb 2 (AFP) - The European Commission called on the eurozone's three biggest economies Wednesday to tighten their budgets further to ensure they meet strict EU fiscal rules.

Germany, France and Italy all came in for renewed criticism in the EU executive's latest assessment of their economies despite their vows to meet a eurozone deficit target this year.

"France, Germany and Italy ... must pursue budgetary consolidation in order to reach the medium-term objective of (a budget) close to balance or surplus," said the Brussels commission.

Germany was at least singled out for praise for launching "remarkable structural reforms" that should put its finances in order over the medium term.

"However, long-term sustainability hinges on the achievement of budgetary consolidation in the medium-term," said the report, assessing EU member states' compliance with the EU's Stability and Growth Pact.

It said that France, like Germany, is on course to bring its deficit under the EU limit - 3.0 percent of gross domestic product - this year.

"But the budgetary situation remains vulnerable," the report said.

It warned Paris that correcting the deficit "does not only require effective implementation of all the measures envisaged, but also the implementation of additional measures in case of adverse developments".

Italy received the most adverse comment from Brussels for positing "somewhat optimistic" growth assumptions and relying on one-off measures to raise revenue.

"Overall, the budgetary targets in the programme do not provide a sufficient safety margin against breaching the 3.0 percent of GDP reference value at least until 2006," the report said, adding that Italy's high debt was also a concern.

EU economics commissioner Joaquin Almunia urged all EU governments to help resurrect the stability pact, left in tatters after France and Germany were let off the hook in 2003 despite repeatedly breaching the 3.0 percent rule.

"Achieving and maintaining national budgets close to balance or in surplus in the medium-term is one of the key aspects of the Stability and Growth Pact which must be revived," he said.

"This is good for the economy and for growth, as it creates margins for stabilisation in economic downturns, increases the efficiency of the public sector and its contribution to the economy while ensuring the sustainability of public finances," he added.

Almunia is set to unveil reforms to the pact for EU leaders to adopt at their next summit in March. While making the pact more flexible in a downturn, the reforms look set to retain the headline 3.0 percent deficit rule.

© AFP

Subject: French News

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