EU executive proposes disciplinary budget steps for France, others

EU proposes disciplinary steps against France and 6 others for excessive deficits, facing political turmoil and economic challenges.

The European Commission on June 19 proposed disciplinary steps against France and six other EU countries over running excessive budget deficits, but will announce deadlines for their reduction only in November.

The countries singled out by the EU executive arm are Belgium, France, Italy, Hungary, Malta, Poland and Slovakia. The deficits are mainly a legacy of the Covid-19 pandemic and the energy price crisis that followed Russia's invasion of Ukraine in 2022.

France is in the spotlight because it is the EU's second-biggest economy and faces political turmoil after President Emmanuel Macron called snap national elections for June 30-July 7 in response to his party's poor results in the European election.

The disciplinary steps, known as the excessive deficit procedure, will be the first such move since the European Union suspended its fiscal rules, aimed at preventing excessive borrowing, in 2020 and then reformed the framework to take into account the new economic realities of high post-pandemic debt.

France had a budget deficit of 5.5% of gross domestic product in 2023, which is expected to narrow only slightly to 5.3% this year, still well above the EU deficit limit of 3% of GDP. French public debt was 110.6% of GDP in 2023 and the European Commission expects it to increase to 112.4% this year and 113.8% in 2025. That is almost twice the EU limit of 60%.

Talks between Paris and the European Commission on how quickly to reduce France's deficit and debt will take place in the coming months after the EU executive proposes to Paris a seven-year path to put debt on a downward path.

“Whatever government is formed after the election on July 7 will face the obligation to work with the Commission to define a medium-term strategy,” a French Finance Ministry official said. “Eventually it will have to produce a strategy coherent with the new Stability and Growth Pact,” the official, who asked not to be named, said.