BERLIN (Reuters) - German Finance Minister Wolfgang Schaeuble has defended France against criticism from the European Central Bank (ECB) over its budget deficit, saying he believes that France will stick to its commitments.
The European Commission has forecast that France’s deficit will be 3.7 percent of gross domestic product (GDP) this year - well short of its 3 percent target under European rules - and ECB board member Joerg Asmussen told Reuters on Friday that Paris faces a test of its credibility, urging it to take “concrete and measurable” steps to reduce the deficit.
“France is not saying it will flout the rules,” Schaeuble told the Stuttgarter Zeitung newspaper on Saturday. “The French government said that, according to the latest growth estimates, it may not be able to meet deficit goals.
“Now we need to discuss with the European Commission what this means for the stability and growth pact. I trust firmly that France will not only stick to European rules, but will do everything to generate growth in a difficult economic period through structural reforms.”
Turning to Italy, which holds its most closely watched election in years on Sunday, Schaeuble said that the country had made important improvements under technocrat Prime Minister Mario Monti, and that it is in Italy and Europe’s interests to continue this course.
On Cyprus, which holds a run-off election on Sunday to elect a president and faces a financial meltdown unless it can clinch a bailout deal, Schaeuble said that he refused to be put under time pressure.
“Whoever applies for a bailout must meet the criteria,” he said. “One of the conditions is that a country is of systemic relevance ... arguments that the markets have long established the systemic relevance of Cyprus are not the complete picture.”
Schaeuble added that there are still doubts over whether Cyprus has adopted all European measures against money laundering and this needed to be clarified.
Reporting by Alexandra Hudson; Editing by David Goodman