The European Commission is recommending that so-called excessive deficit procedures be launched against seven EU member states—Belgium, France, Italy, Hungary, Malta, Poland, and Slovakia—the EU’s executive body announced on Wednesday, June 19th. The Commission has refrained from using this form of punishment in recent years of economic turbulence, and its decision to do so now raises questions of politically motivated timing.
The Commission can launch an excessive deficit procedure against an EU country if it breaches or is at risk of breaching the deficit threshold of 3% of GDP, or if it has a government debt level above 60% of GDP that is not diminishing at a satisfactory pace. The member state in question is obliged to tighten its fiscal policies—by cutting spending or raising taxes—or face a potential fine.
As we recently reported, the Commission in the past came under criticism for failing to enforce the deficit rules, especially in the case of France, with previous Commission President Jean-Claude Juncker famously declaring in 2016 that they had given France leeway on fiscal rules “because it is France.” In fact, of the current 27 member states, only one—Sweden—has never broken either of the two fiscal rules since 2002.
A recent article, Politico, the establishment paper of the EU, hinted that there seems to be much more of an appetite to target France now that Marine Le Pen’s sovereigntist-nationalist National Rally is the favourite to win the French parliamentary elections at the end of June.
The country’s budget deficit reached 5.5% of GDP last year, and is projected to decline to 5.3% in 2024 and 5.0% in 2025, according to the Commission’s report. The current public debt is 111% and is forecast to increase to 114% of GDP by 2025. France’s debt ratio is the third-largest in the euro zone, after Greece and Italy.
The eurosceptic and anti-immigration National Rally has said it would slash taxes on fuel and energy, lower the retirement age to 60, and increase wages for some public servants. The Brussels elite is already asserting that Marine Le Pen would “disregard” EU rules with an “irresponsible spending plan.” French Finance Minister Bruno Le Maire warned that with the projects of the “far left” and the “far right”, the debt “cannot be financed.” Liberal British weekly The Economist writes: “The hope is that, once in power, the National Rally would mellow in the manner of Georgia Meloni, Italy’s hard-right prime minister.”
However, the National Rally seems to be unfazed by the threats, with the party announcing on their X social media page that “we will give the French their money back!”
The Commission has examined 12 out of the 27 member states and concluded that seven of them have not fulfilled the criteria set out by the EU’s Stability and Growth Pact. The deadlines for reducing deficits will be announced in November.
Brussels’ fiscal rules were designed to ensure the euro’s stability but were suspended when the COVID pandemic and the economic consequences of the war in Ukraine required states to spend more. In January, after years of negotiations, EU states agreed to re-impose them.
