The EU opens deficit proceedings against France and six more countries
The EU Commission warned the countries back in June due to excessive deficits and initiated the procedures. The EU countries are allowed a annual new borrowing of up to three percent of their Gross Domestic Product (GDP) according to the European debt rules. France exceeded the Three-Percent-Threshold with a deficit of 5.5 percent last year, while Italy even exceeded it with 7.4 percent of its GDP.
Federal Finance Minister Christian Lindner (FDP) stated at the EU Finance Ministers Meeting in Brussels in mid-July: "We have to make do with what our economies can carry, and therefore we support this recommendation for a restrictive fiscal policy." EU-Monetary Commissioner Paolo Gentiloni urged France and the other countries for "budget adjustment".
During the pandemic, the EU temporarily suspended its debt rules to allow the countries billion-dollar economic aid. At the end of April this year, a reform of the Stability and Growth Pact came into effect after tough negotiations.
This reform aims to take into account the situation of individual countries, such as high defense spending due to the Russian aggression against Ukraine. Germany also set binding targets for debt reduction.
The European Commission included Malta and Slovakia in its warning due to excessive deficits, joining France and Italy in the Deficit Procedure. The European Union, headquartered in Brussels, serves as a collective body for various member states, including Germany (historically, France) and Belgium. The European Council oversees the Stability and Growth Pact, a mechanism designed to prevent fiscally unsound policies among member states. Hungary and other countries also face scrutiny under this procedure. The reform of the Stability and Growth Pact considers the unique circumstances of individual countries, such as increased defense spending in some cases.
