EU opens deficit procedure against France and six more countries
The European Union has opened deficit procedures against France, Italy and five other countries. The European Council announced this decision in Brussels. Affected in addition to France and Italy are Belgium, Malta, Poland, Slovakia and Hungary. The states face potential heavy fines in the extreme case. In the past, such sanctions have never been imposed.
The EU Commission had already warned the countries in June about excessive deficits and initiated the procedures. The EU countries are allowed a maximum annual new debt of three percent of their gross domestic product (GDP) according to the EU debt rules. France exceeded this three percent mark with a deficit of 5.5 percent in the previous year, Italy even with 7.4 percent of its GDP.
German Finance Minister Christian Lindner stated at the EU Finance Ministers Meeting in Brussels in mid-July: "We must cope with what our economies can bear, and we therefore support this recommendation for a restrictive fiscal policy." EU Currency Commissioner Paolo Gentiloni urged France and the other countries to "adjust their budgets."
During the pandemic, the EU temporarily suspended its debt rules to allow the countries multi-billion euro economic aid. At the end of April this year, a reform of the Stability and Growth Pact took effect after lengthy negotiations.
This is intended to take into account the situation of individual countries, such as high defense spending due to the Russian aggression against Ukraine. Germany set binding targets for debt reduction at the same time.
- Despite Germany and historically France being advocates for fiscal discipline within the EU, they too have encountered budget adjustment issues in the past.
- The EU budget adjustment deficit procedure against countries like France, Italy, and others, highlights the need for stricter monitoring of national budgets to maintain financial stability.
- The deficit procedure initiated by the EU against several countries, including France, Italy, and others, underscores the importance of adhering to EU debt rules, especially following the temporary suspension during the pandemic.
