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Economy

Valls stands by 2015 French budget despite threat of showdown with Europe

media A minister leaves last week's cabinet meeting with a press release about France's 2015 budget Reuters/Philippe Wojazer

French Prime Minister Manuel Valls told MPs that his government was sticking to its proposed 2015 budget, despite threats that the European Commission may order France to revise it.

Despite planned spending cuts, the budget assumes that France will continue to overshoot European deficit targets until 2017, meaning that it will need a third extension of an EU deadline to reduce the budget deficit to 3.0 per cent of gross domestic product (GDP).

Dossier: Eurozone in crisis

Speaking in parliament on Tuesday, Valls said that France would pass the budget it needs.

He told parliamentarians yesterday that they are the only people who can approve the French budget and no one else has the authority to do so.

But since last year the European Commission has been able to tell France to revise its budget if it deems it has overstepped public-spending limits.

Finance Minister Michel Sapin said that France has nothing to be worried about and has met all of its budgetary requirements

“France has never, ever made this much of an effort,” he said. “France has never cut this much and the tax cuts for businesses and households are exactly what we announced last spring.”

The European Commission says it is waiting for France to formally submit its 2015 plan before it makes a decision on whether to ask for revisions.

As it stands, the budget means a deficit of 4.3 per cent of GDP.

So the Commmssion will face a tough decision.

To ask Europe’s second biggest economy to go back to the drawing board would be a huge test of its newly acquired powers.

To further complicate matters, the designated economic affairs commissioner is none other than Pierre Moscovici, who served as French finance minister until March.

He has come under fire from right-wingers in the European parliament, who claim he would be soft on his homeland but insists that he would hold all member states, including France, to the same standards on public-spending targets.

France has until 15 October to present its budget and the commission has until the end of the month to make a decision.
 

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