France faces pressure from peers to tighten spending plans

Mon Oct 13, 2014 1:02pm EDT
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By Robin Emmott and John O'Donnell

LUXEMBOURG (Reuters) - France faced renewed pressure from euro zone peers on Monday to tighten spending next year, amid a growing rift over its plans to flout European budget rules.

The dispute with France, the euro zone's second-largest economy, over its planned budget, is an added problem for the bloc, which is hamstrung by political division while its economy is slowing.

"The figures we are hearing from Paris are not very hopeful," Jeroen Dijsselbloem, the Dutch finance minister, told reporters before chairing a meeting of euro zone finance ministers, or Eurogroup, in Luxembourg on Monday.

Euro zone countries are required to abide by European Union rules that limit a country's budget deficit to no more than 3 percent of gross domestic product.

France, which has already been given an extra two years to meet deficit targets, announced this month that it would not bring its deficit down to within European Union limits until 2017, four years later than originally pledged, setting up a confrontation with the European Commission.

"There are certainly concerns there," Dijsselbloem said. "It would be a good thing for Europe if we find a solution for all the budgets within the rules ... but no deals outside the pact," he said, referring to the European budget regime.

He drew a distinction with Italy, which has also argued for some flexibility, saying there was less concern that Italy's public finances would stray so far from EU targets.

A French government source said that there would be no changes to the French draft budget before the deadline for handing it to the European Commission on Oct.15, drawing the battle lines for the weeks ahead.   Continued...

Germany's Minister of Finance Wolfgang Schauble speaks during a discussion on "A Reform Agenda for Europe's Leaders" during the World Bank/IMF annual meetings in Washington in this October 9, 2014 file picture.    REUTERS/Joshua Roberts/Files