2024-07-26 14:39:48
The European Union on Friday launched a procedure against seven member states, including France, for excessive public deficits, the first since the Covid-19 pandemic, during which budget rules were suspended.
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Now it’s official. On Friday, July 26, the European Union formally launched its excessive public deficit procedure against seven member states, including France, the first since it suspended its budget rules in 2020 due to the coronavirus crisis.
In addition to France, the decisions also apply to Italy, Belgium, Hungary, Poland, Slovakia and Malta.
Moreover, the Council of the European Union, the body representing the European Union, noted in a press release that Romania has been subject to such procedures since 2019, and that the country continues to suffer “due to the lack of effective measures to correct the deficit” on the 27th.
They must take corrective measures to comply with these budget rules in the future or face economic sanctions. These rules were put on hold after 2020 due to the economic crisis related to Covid-19 and the subsequent war in Ukraine. This year, they were reformed and restarted.
Last year, the largest EU deficits were in Italy (7.4% of GDP), Hungary (6.7%), Romania (6.6%), France (5.5%) and Poland (5.1%).
In principle, the Stability Pact stipulates that financial sanctions of 0.1% of GDP per year will be imposed on countries that do not implement coercive measures. For France, the amount of sanctions is close to 2.5 billion euros.
In reality, these politically explosive punishments were never carried out.
France to save another $10 billion
France, with debt at 110 percent of GDP, ran excessive deficits for much of the decade since the euro was created in the early 2000s, but emerged from the deficit trap in 2017.
Two weeks ago, outgoing French Economy Minister Bruno Le Maire said France must save 25 billion euros by 2024 to restore public finances.
Mayor Bruno said some $15 billion in savings had been “delivered” but another $10 billion was yet to be achieved through reduced spending by ministries and local authorities and through more efficient rent taxation of energy companies.
Regarding the public deficit, Paris has pledged to get back on track within four years. Bruno Le Maire has set a target of a deficit of 5.1% in 2024 (5.5% in 2023), while Brussels expects a deficit of 5.3% this year and 5% in 2025.
From now on, disciplined countries must submit medium-term plans by September on how to get back on track.
The European Commission will then communicate its assessment of these plans in November and detail the path to restore fiscal health.
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