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10/12/2016

German government: France must adhere to Stability Pact

Euro & Finance

German government: France must adhere to Stability Pact

Michel Sapin is France's newly appointed finance minister. Photo taken in May 2013. [Parti socialiste/Flickr]

France is again seeking an extension from the EU on the deadline to reduce its national deficit. European Parliament President Martin Schulz supports the idea but the German government is insisting on adherence to the guidelines of the European Stability Pact. EurActiv Germany reports.

In a speech earlier this week, French President François Hollande made it clear he would attempt to renegotiate Brussels’ demands to reduce the French deficit to under 3% of GDP by 2015. The new finance minister, Michel Sapin, also intends to renegotiate the timeline with the European Commission.

“The government will have to convince Europe that France’s contribution to competitiveness, to growth, must be taken into account with respect to our commitments,” Holland said on 31 March.

But the EU has already given the country two extra years to comply with the Stability Pact’s deficit limit of 3% of GDP. On Thursday (3 April) in Frankfurt, ECB President Mario Draghi again stressed how important it was for eurozone countries to honour their fiscal commitments within the EU.

On Friday morning, European Parliament (EP) President Martin Schulz, spoke in favour of meeting French demands. Schulz is the European Socialists’ candidate in the upcoming European elections. Speaking on BFM-TV in France, he said the country must be given more time to comply with the Maastricht criteria. The rules of the Stability and Growth Pact, with its debt limit of 3% must “be reconsidered”, said Schulz.

Norbert Barthle is Bundestag spokesman on budgetary policy for Merkel’s Christian Democratic Union (CDU). In his view, another postponement of the deadline should only take place under clear conditions which state that France will really put its budget back on course.

The chairman of the Bavarian Christian Social Union (CSU) political group in the EP, Markus Ferber strongly criticised Schulz’s demands to soften the terms of the Stability and Growth Pact: “While the CDU and the CSU have been acting as a fire brigade to extinguish the euro debt-crisis, Martin Schulz is adding new fuel to the growing fire.”

France needs a “clear course of consolidation and far-reaching reforms. New debts do not help remedy France’s weakened competitiveness but only postpone the necessary adjustment process”, said Ferber.

“Martin Schulz is living ten years behind our time”, criticised chairman of the CDU/CSU political group, Herbert Reul (CDU).

“Instead of drawing up reforms and consolidation measures in 2014,” he said, “Schulz wants to repeat the primeval sin of former Chancellor Schröder who intentionally violated the Maastricht criteria during his term”.

Background

On 30 March, the French Parti Socialiste suffered a electoral rout during the second round of local elections. Having lost 155 towns, some of which are historically bastions of the French left such as Limoges, Saint-Etienne or Belfort, the left has been damaged for future elections.

In the wake of the electoral disaster, the French president François Hollande announced that he would nominate Manuel Valls to lead his new 16-minister strong government, seeing the departure of Pierre Moscovici and the arrival of Ségolène Royale and François Rebsamen.