France has been given a two-year budget deficit extension by the European Union (EU) finance ministers.
The country needs to bring its budget deficit below three percent of GDP as part of the agreement laid out by the EU. It is France’s third extension since 2009 and will need a lot of work to reduce the deficit from its current position of 4.1 percent of GDP, NewsNow reported.
France has been struggling with a high unemployment rate and this latest extension will provide more time to resolve the issue, it said.
A statement from EU finance ministers read: “The Council called on France to fully implement measures already adopted for 2015. It called for an additional fiscal effort by the end of April 2015, involving additional structural measures equivalent to 0.2 percent of GDP.
“The Council found that extending the deadline for correcting the deficit was justified by the fiscal effort made by France since 2013, and by the current weak economic conditions and other factors.”
Previous Attempts
France has previously outlined a number of strategies to tackle its deficit problem. In October 2014, the country’s finance minister, Michel Sapin, outlined a plan to reduce the budget deficit by €3.6-3.7 billion ($3.92b) in the next year. However, the latest announcement from the EU highlights that France has failed to meet this target.
Sapin also unveiled plans to reduce France’s budget deficit to below three percent of GDP by 2017, two years later than the original promise of 2015. The EU has now laid out new targets for France to meet.
The Council said that the country must reduce its deficit to 4.0 percent of GDP for 2015, then to 3.4 percent for 2016 and finally 2.8 percent for 2017.
Controversy
The Commission recommendation sparked controversy among some smaller eurozone countries and within the Commission itself, because many policy-makers see it as undermining the credibility of the rules set out in the EU’s Stability and Growth Pact.
European Central Bank Executive Board Member Benoit Coeure said the eurozone should not create a perception that it was unraveling its own rules or that laws were applied differently for big and small countries.
“We would not create trust in the eurozone if we were to create the perception that what has already been decided is being unraveled,” Coeure said.
“It is always extremely important... to avoid a situation, or even to avoid a perception, that large countries are treated in a more benevolent way ... than smaller countries,” he said.
