Today, the European Commission published its Winter Economic Forecast revealing that the French government is expected to reach a budget deficit of 3.7% of GDP in 2013 and to reduce its structural deficit by 1.3% of GDP. In 2012 France reached a budget deficit of 4.6% of GDP and an annual fiscal effort of 1.2%. According to a Council recommendation setting a deadline for the correction of its excessive deficit, France is required to achieve a reduction of its structural deficit by an average of at least 1% of its GDP between 2010 and 2013. The Council’s target was therefore met for 2012 as well as 2013.
In the framework of the updated Stability and Growth Pact (the so called “Six Pack”) an EU Member State under excessive deficit is requested to take action so as to achieve a minimum annual improvement of its structural deficit by at least 0.5% of GDP. In contrast with the 3% criteria for triggering an excessive deficit procedure, structural deficits take into account deficit developments and potential growth, thus outweighting fluctuations of the economic cycle.
Commenting on the European Commission´s updated Economic forecast for France, French and German Green ECON MEPs Jean-Paul Besset and Sven Giegold said:
“France should be congratulated for respecting its legal obligation under European law. In the current economic context, the annual target of a 1% GDP of structural deficit reduction is already questionable. The fact that the French government went beyond this target is an achievement. It is hence technically, legally and economically wrong to accuse France of not respecting its European obligations.
The Commission made an important point when pointing out that an extension of the deadline for bringing the French deficit below 3% could be extended to 2014. This is justified as the reason for the headline deficit of 3,7% is not a lack of fiscal consolidation but the economic crisis. Conservative German critics of French efforts such as CSU’s Markus Ferber and CDU’s member of the Bundestag Michael Fuchs are therefore at best superficial.
The Greens fully support the need for credible and clear commitments for fiscal consolidation as a key element for a solution to the Eurozone crisis. Sustainable development cannot be reconciled with ever higher debt ratios. However, this objective can only be achieved through an approach, taking into account both the objective of debt reduction and the economic cycle. As the recent IMF reassessment of the austerity impact on GDP reveals, sticking to rigid nominal targets irrespective of the economic context is counterproductive. In the case of Spain, the Commission has already show some flexibility. This is consistent with the toughened rules of the Stability and Growth pact. Such flexibility would be even more justified in the case of France as it has not have experienced an artificial boom driven by a public or private debt bubble. Therefore, there are no rational but only ideological reasons for not letting automatic stabilizers work in times of crisis. In order to promote an effective solution to the Eurozone crisis economic indicators, such as deficit target should be used precisely and not be abused for superficial arguments.
Undoubtedly, the French economic model is in difficulty and needs structural reforms. Its current account deficit is worrying. But, this can neither be tackled by one-sided austerity nor by blind old productivist policies. France as well as Europe as a whole need a Green New Deal to improve its economic performance and reconcile its production model with the limits of the planet. The way to go for France as well as for Euro countries in even deeper difficulty would be less rocky if surplus countries such as Germany would increase green investment and ensure a more equal burden sharing distribution resulting in higher imports.”
The Winter Economic Forecast of the European Commission can be found here:
Press statements by conservative parliamentarians:
Markus Ferber: http://www.manager-magazin.de/politik/weltwirtschaft/0,2828,883445-2,00.html
Michael Fuchs: http://www.dradio.de/dlf/sendungen/interview_dlf/2018726/