The European Commission opened the way on Wednesday June 19 to procedures for excessive public deficit against seven EU countries, including France, two weeks before the legislative elections. Italy, Belgium, Hungary, Poland, Slovakia and Malta are also concerned, the Commission announced. Romania had already been subject to this disciplinary procedure since 2019.
These countries exceeded the public deficit limit last year, set at 3% of gross domestic product (GDP) by the stability pact, which also limits debt to 60% of GDP. The highest deficits in the EU were recorded last year in Italy (7.4% of GDP), Hungary (6.7%), Romania (6.6%), France (5. 5%) and in Poland (5.1%).
Formally, the European executive will propose to member states to open the procedures at a future meeting of finance ministers on July 16. The States concerned will have to take corrective measures to comply in the future with the budgetary rules of the European Union, under penalty of financial sanctions. These rules were put on hold after 2020 because of the economic crisis linked to Covid-19 and then the war in Ukraine. They were reformed and reactivated this year.
Sanctions never applied
European rules require countries with excessive deficits to reduce the deficit by a minimum of 0.5 points per year, which requires a massive effort of austerity. The Stability Pact in principle provides for financial sanctions of 0.1% of GDP per year for countries that do not implement the imposed corrections, or nearly 2.5 billion euros in the case of France. . In reality, these politically explosive punishments were never applied.
France, whose last budgetary surplus dates back to 1974, has been in an excessive deficit procedure most of the time since the creation of the euro, at the turn of the 2000s. However, it emerged from it in 2017. The country, in the viewfinder of the rating agencies, has been in political crisis since the dissolution of the National Assembly decided by the president, Emmanuel Macron, after the defeat of his camp in the European elections on June 9. Borrowing rates in Europe’s second-largest economy suddenly rose, and the Paris stock market fell amid the instability.
The far right and left oppositions, leading in the polls, also plan to open the spending tap wide, but also to reverse the emblematic reforms, recommended by Brussels, relating to pensions and the employment market. work. Enough to compromise Paris’ promise, already considered not very credible, to return in 2027 below the 3% threshold with regard to the deficit.
Political standoffs are already looming between Rome and Paris, on the one hand, and the Commission and the countries that are most particular about respecting budgetary rules, including Germany, on the other. Correcting slippages will in any case be difficult in a context of low growth and geopolitical tensions. Public finances are heavily used to support Ukraine against Russia, but also to invest in the green transition in the face of global warming.
By October, the Twenty-Seven will have to send their multi-annual budgetary plans to Brussels, which will be scrutinized by the Commission and the Council, the body of the Member States. In November, Brussels will give its recommendations for the restoration of public accounts.