The European Commission published its assessment of EU member states’ budgets on Tuesday and gave its support to the French government.
French austerity is welcomed by Brussels. The European Commission on Tuesday published its assessment of EU member states’ budgets and backed the French government, which was threatened with censure, by endorsing its austerity efforts. France is among the stupid in Europe. With a sharply declining public deficit, expected this year at 6.2% of gross domestic product, it shows the worst performance among the Twenty-Seven, with the exception of Romania, which is far from the 3% ceiling authorized by EU rules. Under pressure from the financial markets, Antoine Armand has planned an effort for next year “60 billion” euro, in the
The new Finance Minister declared it “rejoice” downstream from Brussels. “The European Commission shares France’s orientations, both on the multiannual budget trajectory, (…) and on the reform and investment agenda, which it considers credible, and I welcome this position”he assured in a statement, reiterating his opinion “determination” rehabilitate very degraded public finances.
But the bitter potion is difficult to overcome. The leader of the deputies of the Rassemblement National, Marine Le Pen, contests some measures, such as the increase in taxes on electricity, which must affect the purchasing power of families. On Monday he reiterated his threat to bring down the center-right government by voting on a censure motion with the left.
In this delicate context, the Commission published on Tuesday its assessment of euro area countries’ budget plans for 2025 and EU countries’ medium-term plans, including the trajectory of returning below the 3% deficit for countries that have crossed this limit. Brussels has generally satisfied the French government. The European executive has validated the scenario proposed by Paris of a reduction in the deficit to 5% of GDP in 2025, before a return “in the nails” in 2029 at 2.8%. He believes in France’s multi-year plan “satisfies the requirements and defines a credible trajectory” reduce or maintain debt “at prudent levels”. Only the project for the year 2025 is also judged “second”. “The government’s approach is to make a stronger budgetary effort than expected by the Commission next year”explains Andreas Eisl, expert at the Jacques-Delors Institute. The question is whether the government will survive and whether the plan validated by the European executive will actually be implemented.
Once the 2025 budget has passed, the acid test for Michel Barnier
“Political fragility”
“France’s political fragility obviously worries the Commission”
If it does not make the efforts requested by its partners, France could, according to the texts, be imposed fines equal to 0.1% of its GDP each year, or around 2.8 billion euros, from next summer. The stability pact was suspended between 2020 and 2023 to avoid a collapse of the European economy after the Covid-19 pandemic and then the war in Ukraine. It was reactivated at the beginning of the year and given a makeover to make it more flexible and pragmatic. Budgetary trajectories are now adapted to each Member State and room for maneuver for investments has been introduced. They are staggered over a four-year period, which can be extended to seven years to make the adjustment less brutal, in exchange for reforms. Five countries, including France, Spain and Italy, requested and obtained such an extension. Financial penalties for non-compliance with the pact, previously considered unenforceable because they were too severe, have been reduced to facilitate implementation. “There is pressure from several member states on the Commission to punish those who do not respect the rules”underlines Mr. Eisl, “if we don’t apply them from the beginning, they won’t be respected by anyone”.
What are the long-term implications of France’s austerity measures for its relationship with the EU?
Interview between Time.news Editor and Andreas Eisl, Expert at the Jacques-Delors Institute
Time.news Editor: Good afternoon, Andreas. Thank you for joining us today to discuss the recent assessment published by the European Commission regarding EU member states’ budgets. The Commission has expressed support for the French government in its austerity measures. How significant is this endorsement for France’s economic strategy?
Andreas Eisl: Good afternoon! It’s a pleasure to be here. The endorsement from the European Commission is indeed significant. It not only provides a sense of legitimacy to the French government’s austerity measures but also implies that these efforts align with broader EU fiscal policies. Given France’s current deficit situation—projected to be 6.2% of GDP—this support is crucial as it helps bolster market confidence in French fiscal management.
Editor: You mentioned France’s deficit. With such a high deficit, how does the French government plan on meeting the EU’s directive of reducing it to below 3%? What specifics should we expect from their strategy?
Eisl: The French government has laid out a multi-year plan aiming for a gradual reduction of the deficit. The proposal includes a reduction to 5% in 2025, followed by further cuts aimed at hitting 2.8% by 2029. This ambitious timetable is essential for Paris to regain credibility both domestically and in Europe. The government’s commitment to implementing a €60 billion budget effort next year is a significant step, albeit one that might provoke some political turbulence within France itself.
Editor: Speaking of political turbulence, Marine Le Pen and her party contest many of these austerity measures, particularly the tax increases on electricity. How do you see this political opposition influencing the government’s ability to implement these fiscal reforms?
Eisl: The opposition from Le Pen and the Rassemblement National is indicative of a broader frustration among voters, especially concerning the impact of austerity on purchasing power. The political landscape in France is quite polarized right now. If Le Pen decides to follow through with her censure motion, it could indeed destabilize the government. It poses a real challenge for the current administration—they need to balance necessary fiscal measures with the public’s sentiment. If they are not seen to be protecting citizens from the harsh impacts of these policies, they may face significant backlash.
Editor: That raises an interesting point about public perception. How crucial do you think public support is for the success of such austerity measures, and what might the government do to mitigate potential fallout?
Eisl: Public support is absolutely critical. Economic reforms often hinge on winning the social license to implement them. The French government could focus on communication strategies that highlight the long-term benefits of fiscal discipline, not just for the economy but for societal welfare as well. Additionally, targeted support measures for the most vulnerable populations could help mitigate the impact of austerity measures and foster a more cooperative public atmosphere.
Editor: And Andreas, reflecting on the broader EU context, how do you see France’s budgetary stance influencing other member states, particularly those also struggling with deficits?
Eisl: France’s approach could very well set a precedent for other member states. If France successfully navigates this complex fiscal landscape while maintaining public support, it may inspire similar strategies in countries facing their own fiscal challenges. Alternatively, should France fail, it could signal to other states that strict austerity measures could lead to political instability, prompting a reexamination of fiscal policies across the EU.
Editor: Thank you, Andreas, for the insightful analysis. It seems that the situation in France is as complex as it is critical for both its internal politics and its relationship with the EU. We’re sure to follow developments closely.
Eisl: Thank you for having me. It’s certainly a crucial moment for France and the EU, and I look forward to seeing how this unfolds.