Sarkozy heads for EU clash over economic policy

9th July 2007, Comments 0 comments

PARIS, July 8, 2007 - President Nicolas Sarkozy is likely to ruffle feathers Monday when he heads to Brussels to try to persuade European finance ministers to let him bend EU rules and delay balancing France's budget.

PARIS, July 8, 2007 - President Nicolas Sarkozy is likely to ruffle feathers Monday when he heads to Brussels to try to persuade European finance ministers to let him bend EU rules and delay balancing France's budget.

In an unprecedented move, the newly-elected rightwing leader is to attend a meeting of finance ministers from the 13-nation eurozone to outline his controversial budget policy.

"The economy, growth, and full employment are subjects that are so important that heads of government and heads of state must deal with them directly," Sarkozy said in an interview published Sunday in France's Journal du Dimanche.

In addition to making his case for pushing back the previous French government's commitment to balance state accounts by 2010, Sarkozy is also due to flesh out his plans for giving a higher political profile to the eurozone.

But both initiatives could prove to be contentious, especially with Germany, which is making big efforts to balance its books and is suspicious of Sarkozy's push for more "economic governance" for the eurozone.

Sarkozy wants more time to rein in the French deficit in order to launch a series of tax cuts aimed at jolting the economy with a growth "shock," but the move -- likely to cost 13 billion euros (18 billion dollars) -- risks reversing the deficit's current downward trend.

If the deficit starts rising again, it could soon break an EU rule requiring fiscal shortfalls to be kept to less than 3.0 percent of output, which could get Paris in trouble with its European partners.

While members of the eurozone pledged in April to balance their government budgets by 2010, French Prime Minister Francois Fillon on Tuesday said France would not achieve that goal until 2012.

His government also said it now foresaw a public deficit, which covers national and regional administrations as well as the social welfare account, of 2.5 percent of gross domestic product in 2007 and 2008.

France's previous administration under president Jacques Chirac pledged to slash the public deficit to 1.8 percent by next year.

The European Union's Portuguese presidency and the European Central Bank have warned against breaking commitments on reining in public finances.

While Sarkozy faces a rough ride over his fiscal plans, his push for more "economic governance" in the eurozone is only slightly less controversial given his past attacks on the ECB's monetary policy and calls to devalue the euro.

He has frequently criticised the central bank's focus on inflation and wants a higher profile for the Eurogroup of finance ministers to act as a counterweight, much to the concern of Germany, which is deeply attached to the ECB's independence from politics.

He has also called for a review of the eurozone's currently relaxed approach to the euro's strength, which he says is undermining the competitiveness of France's exports.

"We cannot continue to be the only ones not to have a currency that is in the service of growth and employment," Sarkozy told the Journal du Dimanche.

The looming clashes over economic policy come as Sarkozy tries to carve out a new leading role for himself and France on the EU stage after French voters plunged the bloc into political uncertainty two years ago by rejecting the EU's draft constitution.

At his debut EU summit last month in Brussels, he went out of his way to help broker a deal for a new treaty reforming the Union's underlying rules.

But he also courted controversy by getting the importance of "free and undistorted competition" in the new treaty downgraded to the alarm of free-market friendly countries like Britain.


Copyright AFP

Subject: French news

0 Comments To This Article