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03/12/2016

Brussels ready to give France budget leeway for security

Justice & Home Affairs

Brussels ready to give France budget leeway for security

Valdis Dombrovskis and Pierre Moscovici

[European Commission]

The European Union said on Tuesday (17 November) it was ready to take French security priorities into account after France said it was likely to break eurozone deficit rules due to the Paris attacks.

European Economics Commissioner Pierre Moscovici said on Tuesday (17 November) that the executive could offer France leeway on its budget to take into account security priorities in the wake of the Paris attacks.

“One thing that is clear in the current circumstances is that in this terrible moment the protection of citizens, the security of citizens in France and Europe is the absolute priority,” Moscovici, a former French finance minister, told a news conference dealing with the review of all EU state budgets.

“The rules of the stability pact do not stop member states from defining their priorities. We understand that the priority is security,” Moscovici said.

President François Hollande on Monday (16 November) pledged to spare no expense to reinforce and equip its security and law enforcement forces to fight terrorism, even though that would take the budget deficit beyond European limits.

In Brussels, Moscovici said the tough budgetary rules imposed by the Commission after the eurozone debt crisis were “neither rigid nor stupid, they are capable of dealing with situations.

“It is in that spirit that we are in discussions with the French government.”

French Prime Minister Manuel Valls confirmed earlier that France would exceed its spending targets ? which had aimed to reduce the deficit below 3% of economic output by 2017 ? in order to fund extra police and military.

“We have to do this and Europe should understand this,” Valls told France Inter radio. “It is also time that the EU, the European Commission, understand today that this battle concerns France, and also Europe.”

The show of fiscal solidarity came just hours after EU defence ministers unanimously backed a French request for military assistance in the wake of the Paris attacks.

>> Read: EU ‘unanimous’ in agreeing French treaty-call for help after attacks

Moscovici said EU budget rules had flexibility to allow for states to respond to “unexpected circumstances” but that the EU would reassess the French budget in light of new spending ? though there had so far been no effect on the 2016 budget.

“We will reevaluate all possible budgetary expenses of these new developments,” Moscovici said. “It is too early to say how they will impact France’s budgetary trajectory.”

Valdis Dombrovskis, European Vice-President for the Euro, told the same news conference that France had room for manoeuvre within the EU budget rules.

France, which has been seen as the eurozone’s number one problem since 2014, now appears to have dropped off the Commission’s radar.

>>Read: Spain overtakes France as the eurozone’s problem child

Background

European finance ministers on 10 March approved a controversial two-year extension for France to get its deficit within the bloc's limits. In their recommendation, EU finance ministers set deficit targets for France of 4.0% of GDP for 2015, 3.4% for 2016 and 2.8% for 2017.

>> Read: France wins EU approval for two-year reprieve on deficit

But the warning ignored demands by some European officials for France to be called to task as a repeat offender of the EU rule that national deficits not exceed 3% of economic output.

France has received several extensions in recent years to meet the rules. Smaller countries have made their frustration known, with bailed-out Ireland asking for the same flexibility terms offered the much more powerful France.

In 2013, European Union finance ministers alread gave France a two-year extension to bring its deficit below the EU ceiling of 3% of GDP.

Paris was asked to cut labour costs, reform its pension system and open up its protected markets in exchange for the two-year respite but delivered little in terms of results.

>> Read: Barroso urges ‘credible reforms’ in France in return for deficit grace period

Further Reading

European Commission

Council of the EU