The European Commission announced on Wednesday that France and six other countries face disciplinary measures for exceeding EU budget deficit limits. Deadlines for reducing these deficits will be set in November. This move could constrain any extra spending plans by the French government emerging from the June 30-July 7 election.
This would complicate efforts by Marine Le Pen’s National Rally, leading in opinion polls, to deliver on promises of increased public expenditure and a lower pension age. The snap election, called by President Emmanuel Macron after poor European Parliament election results, has thrown France into political turmoil and increased its borrowing costs.
The other countries targeted by the EU executive are Belgium, Italy, Hungary, Malta, Poland, and Slovakia. Their deficits are largely due to the COVID pandemic and the energy crisis following Russia’s 2022 invasion of Ukraine.
Italy, with a high debt of around 138% of GDP and slow growth, reassured markets of its responsible budget management. Economy Minister Giancarlo Giorgetti emphasised the need for a responsible approach in planning and managing budget policy.
The EU will use its excessive deficit procedure for the first time since suspending fiscal rules in 2020 due to COVID-19. The framework has since been reformed to consider high post-pandemic debt.
France had a budget deficit of 5.5% of GDP in 2023, expected to narrow slightly to 5.3% this year, still above the EU limit of 3%. French public debt was 110.6% of GDP in 2023, projected to rise to 112.4% this year and 113.8% in 2025, nearly double the EU limit of 60%. Talks between Paris and the Commission on reducing France’s deficit and debt will occur after the EU proposes a seven-year program for France.
