“Excessive public deficit”: pinned by Brussels, France among the bad students of the European Union

Paris dans le collimateur de la Commission européenne. MAXPPP – Leyla Vidal

Sept pays européens dans le rouge vont devoir prendre des mesures correctrices.

La Commission européenne a ouvert la voie, mercredi, à des procédures pour"excessive public deficits" against seven countries of the European Union, including France, at the very moment when the candidates are competing with each other on spending promises weeks of the legislative elections.

The European executive will propose to Member States to launch the procedures at a future meeting of Finance Ministers, on July 16. In addition to France, Italy, Belgium, Hungary, Poland, Slovakia and Malta are targeted.

A rule frozen, then restored

All these countries have let their public spending get out of hand, exceeding the public deficit limit set at 3% of gross domestic product (GDP) in 2023. A rule frozen after 2020 due to the pandemic, then the war in Ukraine, but reinstated this year.

With a 7.7% public deficit, Italy is currently the worst performer in Europe, followed by Hungary and Romania. France comes just behind (5.5%).

Aggravating factor, it is also among the three countries that have an excessive public deficit and a high debt (110% of GDP, while the ceiling is set at 60%).

Financial sanctions planned

Since the dissolution, the borrowing rates of the second largest European economy have also increased and the Paris stock market has fallen. France, already in the crosshairs of the rating agencies, has undergone several procedures for excessive deficit over the past twenty years.

However, it had proposed measures to straighten out its finances. Paris thus has until June 2025 to react, by reducing its deficit by at least 0.5 points per year.

The European Stability Pact provides for financial sanctions of 0.1% of GDP per year for countries that do not apply the corrective measures imposed. That is nearly 2.5 billion euros in the case of France.

In fact, these heavy “fines” have never been applied.