EU urges members to submit draft budgets
LUXEMBOURG — EU authorities Wednesday warned eurozone countries, including France and Italy, to hand in their draft budgets by the end of the day under rules aimed at staving off future financial crises.
Since the revelation of a huge hole in Greek finances five years ago set off a devastating debt crisis, member states of the currency bloc must submit draft budgets to the European Commission, the European Union’s executive arm, by mid-October.
By Wednesday evening, Austria, Finland, Germany, Latvia, the Netherlands, Slovakia, Slovenia and Spain had handed in budgets. But several countries where concerns about the economy are greatest still had not.
“Those documents need to be sent to us by today,” Simon O’Connor, a spokesman for the European Commission, said at a news conference.
“There are no sanctions” for missing the deadline, but “we don’t expect countries not to comply with this requirement,” he said.
He emphasized that the tougher rules for reviewing budgets had been approved by the member states themselves.
This year, the requirement to submit a draft budget applies to 16 of the 18 countries using the single currency. Greece and Cyprus are exempt because they are already under close scrutiny as part of their international bailout programs.
If the commission decides that France or Italy should make changes to bring their deficits or debt in line with EU rules, then it must make that request within two weeks of receiving the documents, or by the end of October, assuming that France and Italy make the Wednesday deadline.
The eurozone economy is again a source of global concern since France, the union’s second-largest economy after Germany, has failed to grow as hoped; Italy is still trying to reduce its enormous debt; and Germany, the bloc’s economic engine, is at risk of stalling.
Much attention is on France, where the government announced a “no austerity” budget for 2015, saying it would miss its EU-mandated deficit target for the second time since 2012 by a wide margin.
“The government is reneging on its past commitments with a bewildering lack of compunction,” Bruno Cavalier, the chief economist for Oddo Securities, wrote in a client note. Cavalier branded the country “a serial fiscal delinquent.”
The French stance has rattled EU officials intent on ensuring that the fiscal rule book calling for budget deficits of no more than 3 percent of gross domestic product is respected. The 2015 budget, as announced by the French government, would have a deficit of more than 4 percent next year, and France would not meet the 3 percent target before 2017.
EU officials fear a repeat of what happened in the middle of the past decade when large countries such as Germany flouted rules meant to ensure that disparate economies can operate on a single currency by having all governments adhere to basic debt guidelines.
The declarations by the French government were cause for “some worry,” Jeroen Dijsselbloem, the president of the group of eurozone finance ministers, told reporters this week at a meeting in Luxembourg.
Yet there is little appetite for a prolonged showdown with France that would force it to swallow more austerity and that could make the already unpopular government of President François Hollande even weaker while strengthening the appeal of the far-right National Front, led by Marine Le Pen.
Obliging France to make further cuts also could hurt the economies of its big trading partners, including Germany.