BRUSSELS — The European Union’s executive arm on Wednesday criticized France for running up excessive debt, a stinging rebuke at the height of an election campaign where President Emmanuel Macron is facing a strong challenge from the extreme right and the left.
The EU Commission recommended to seven nations, including France, that they start a so-called “excessive deficit procedure,” the first step in a long process before any member state can be hemmed in and moved to take corrective action.
“Deficit criteria is not fulfilled in seven of our member states,” said EU Commission Vice President Valdis Dombrovskis, also pointing the finger at Belgium, Italy, Hungary, Malta, Slovakia and Poland.
For decades, the EU has set out targets for member states to keep their annual deficit within 3% of Gross Domestic Product and overall debt within 60% of output. Those targets have been disregarded when it was convenient, sometimes even by countries such as Germany and France, the biggest economies in the bloc.
This time, however, Dombrovskis said that a decision “needs to be done based on, say, facts and whether the country respects the treaty, reference values for a deficit and debt and not based on the size of the country.”
The French annual deficit stood at 5.5% last year.
Over the past years, exceptional circumstances such as the COVID-19 crisis and the war in Ukraine allowed for leniency, but that has now come to an end.
Still, Wednesday’s announcement touched a nerve in France after Macron called snap elections in the wake of his defeat to the hard right of Marine Le Pen in the EU parliamentary polls on June 9.
Le Pen’s National Rally and a new united left front are polling ahead of Macron’s party in the elections, and both challengers have put forward plans in which deficit spending is essential to get out of the economic rut.
In the election campaign, Macron’s camp could use the wrist-slap as a warning that the extremes will drive France to ruin, while the opposition could claim that Macron had overspent and still impoverished the French, leaving them no choice but to spend more still.
Despite the rebuke over excessive debt, EU Economy Commissioner Paolo Gentiloni stressed France was also moving in the right direction to address certain “imbalances,” sending a “message of reassurance” to the EU institutions.
The International Monetary Fund forecasts that the French economy will grow at a relatively sluggish 0.8% of GDP in 2024, before rising to 1.3% in 2025.
Unlike the measures imposed on Greece during its dramatic fiscal crisis a decade ago, Gentiloni said, excessive austerity was not an answer for the future.
“Much less does not mean back to austerity, because this would be a terrible mistake,” he said.
He also disputed a claim that it was austerity itself that drove voters to veer to the extreme right, pointing out that lenient budget conditions had been in force for the past years and still allowed the hard right to come out as victors in many member states.
“Look to what happened in the recent elections. If the theory is ‘less expenditure, stronger extremes,’ well, we are not coming from a period of less expenditure,” Gentiloni said.
…