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EU gives France deficit all-clear but wants more austerity

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EU Commissioner Pierre Moscovici REUTERS/Francois Lenoir

The European Commission on Wednsday declared that France has cut its public deficit to an acceptable level after nine years in the budgetary sin bin. But officials called for continuing rigour to reduce the country's public debt.


The commission formally proposed that a meeting of EU finance ministers in July take France out of the "excessive deficit procedure" that was first opened in 2009 at the start of the eurozone debt crisis.

"It is an important moment for France after nine years of a long, painful procedure and sometimes painful but necessary budgetary efforts," said EU Economic Affairs Commissioner Pierre Moscovici at a news briefing.

The commission forecasts that France will have a deficit of 2.6 percent of GDP in 2017, below the EU's three percent limit.

This would be followed by 2.3 percent in 2018 and 2.8 percent in 2019, according to its latest economic forecasts.

President Emmanuel Macron has seen meeting the deficit target as a key to convincing other EU nations, notably Germany, of the need to reform the eurozone.

Now only Spain remains subject to the procedure, which can lead to sanctions and fines.

Drive to cut debt

But the change means even stricter rules will be applied so as to reduce France's public debt, which is 96.4 percent of GDP, way over the EU's 60 percent limit.

That necessitates a new "battle", according to Moscovici, who called for "the minimum wage to be compatible with job-creation and competitivity", and more tax and spending cuts.

The government's promise to take on the debt of the state-owned SNCF rail network could undermine efforts in that direction.

The incoming Italian government, a coalition of the right-wing League and anti-establishment Five Star Movement, has said it will defy Brussels over austerity, regardless of its public debt of 130.7 percent of GDP this year.

Claiming credit

There was something of a scramble to claim credit for the French deficit reduction.

Moscovici declared the announcement to be a "symbolic moment" for him, as a former French finance minister.

François Hollande, under whose presidency Moscovici served, said the lower deficit and rise in production were due to decisions taken during his term in office.

But current Finance Minister Bruno Le Maire declared that "the efforts undertaken by the [current] government have borne fruit", in a statement.